Innovation Trends 2020
(from a webinar I delivered on 30 April 2020).
Each year I write a paper on Global Innovation Trends. My research for it involves interviewing 100 corporate executives who run innovation for their organization. So their titles are “Head of Innovation”, “Director of Innovation”, “VP Innovation”, etc. It’s a pretty amazing opportunity to talk to the people who run innovation for some of the largest brands in the world, located all over the planet. I look for patterns in these interviews, and then write a paper.
Today I’m going to give you a preview of this year’s results, and I’ll deliver it in three parts: (1) Trends in innovation methodology; (2) Marketplace trends; and then, yes, (3) Some thoughts on how the post-COVID world may be different.
Trends in Innovation Methodology
It’s been almost 25 years now since Harvard Business School professor Clayton Christianson first published The Innovator’s Dilemma, the groundbreaking book that described how incumbent companies are often eventually disrupted by new innovation that renders them obsolete. Christianson outlines some ways that companies can avoid this fate by getting better at creating and embracing innovation.
And yet, 25 years later, most disruptive innovation still comes from startups. Personal transportation was disrupted by Uber, not by the taxi companies. Lodging was disrupted by Airbnb, not the big hotel companies. Media was disrupted by YouTube, Twitter, and Spotify, not by CBS, NBC, or ABC.
And so, in corporate executive suites all over the world, innovation has become a trendy buzzword as every incumbent company wants to make sure it’s not “Ubered”. Every CEO says that their organization is “creating a culture of innovation”, and the fancy consulting firms have been busy teaching companies how to use Design Thinking and other innovation frameworks.
Three years ago when I did my innovation trends study, the executives I interviewed talked with excitement about all the different innovation methodologies — agile, human-centric design, design thinking, double diamond, and more.
This year they seemed to be largely over their buzzword fetish, with most focused on just getting results. As one executive put it to me, “Companies exist to serve customers. How is “customer-centric innovation” a new thing? For us, innovation means returning to our roots of talking to customers and understanding how their needs are evolving”.
A different innovation exec I talked with put it even more succinctly: “My job is to wake up every morning and think about how we can make our customers’ lives better”. You don’t need buzzwords or fancy consulting companies to understand that mandate.
Another common theme that emerged from my interviews this year was corporate innovation groups are increasingly looking at startups at partners rather than competitors. As one exec put it to me “the odds are that the best innovation is going to happen outside our four walls. So rather than pretending that we can do innovation better than startups, we prefer to actively support the startups in our ecosystem”.
But the biggest theme that I heard this year is how corporate innovation groups are accelerating cycle times using simulated environments, established innovation methodologies, regulatory sandboxes, and open innovation. Each of these is a discussion of its own, but taken collectively they are being used create innovation more quickly. In the commercial world today, time-to-market is everything.
Innovators and entrepreneurs work within the context of larger marketplace trends. Here are some that I think are worth paying attention to:
We are in the age of platforms. Facebook, WeChat, WhatsApp, Amazon. All of these are platforms where consumers hang out to socialize, do shopping, consume content, and make payments. On the enterprise side, Salesforce increasingly is the platform that matters, with a whole ecosystem around it, and even Slack is becoming a platform for all the humans and systems within an enterprise. WhatsApp has 2 billion users. WeChat has over 1 billion active users. Platforms are where the action is at today.
The end of the American internet. The first 25 years of the consumer internet was almost completely dominated by American companies — Netscape, Yahoo, eBay, Google, Amazon, Facebook, etc. That national monopoly is over now, as Alibaba and WeChat are from China, Spotify is from Sweden, and Waze is from Israel. China and India have 5x the number of internet-connected smartphones that the US has. The next wave of internet innovation is happening now, and it’s happening outside the US.
Consumer tech is driving enterprise tech. A generation ago, technology innovation started for enterprise use and eventually worked its way down to consumers. Computers were only found in companies for many years before they emerged as a consumer product. GPS was a military and commercial innovation long before it became embedded in every consumer’s mobile phone. Today it’s happening the other way around, as chat was for consumers before Slack took it to the enterprise, hosting accounts were for consumers before AWS took them big time, online file storage was focused on individuals before Box made it a billion dollar enterprise opportunity. Want to know the next big trends in enterprise software? Take a look at what’s going on in consumer software today.
AI is changing everything, but it’s not the AI you think it is. Most of us grew up watching and reading science fiction where computers talk, think, and make decisions. So we keep expecting that from AI. Meanwhile, the disruption that AI is bringing to almost every sector today is more accurately thought of as Decision Support, instead of Automated Decisions. Or, to put it another way, humans are becoming more efficient because AI can help us make better decisions. Uber drivers are more efficient because AI in the app does efficient dispatching and routing. Researchers are more efficient because AI can find data patterns more quickly.
Banking-as-a-Service. Traditional banks are now legacy organizations — the real high-value action has moved to Venmo, Transferwise, Robinhood, and all the other Fintech players who are providing innovative ways of delivering financial services to consumers. New open-banking initiatives such as the PSD2 regulations in Europe require banks to open up their API’s to third-parties, fostering tremendous growth and innovation in Fintech startups. Traditional banks are becoming low-value warehouses.
Digital Natives are now the majority. The median age of the people on the planet is now 29. Which means that most of the world today grew up during the internet age. Digital Natives are now the majority. That’s a big demographic deal.
Mobile is done. Mobile is just beginning. There are 5.5 billion adults on the planet today, and 5 billion mobile phones. Of those, 4 billion are internet-connected smartphones. This means that selling mobile phones is a declining opportunity, whereas finding new ways to serve people via mobile devices is a growing opportunity. The value is moving up the mobile stack — it’s no longer in the devices and the network; it’s on the top of the stack.
How will the post-COVID world be different?
Finally, some thoughts on potential post-COVID world trends:
Distance Learning. Online learning has been around for several years now (remember when MOOC’s were supposed to change everything?), but online education is still considered a second-class way to learn. Suddenly, with the global pandemic, pretty much every university in the world has had to switch over to online classes. There is huge opportunity in finally developing innovative technology, pedagogy, and curriculum that that provides first-class distance learning.
Cashless will be King. Countries like Sweden are already 95% cashless, but other countries have lagged behind, even as new digital payment systems such as ApplePay and Contactless Cards have proliferated. Paper cash in pockets, of course, is a well-known public health hazard, and this global pandemic will finally change consumer behavior with regard to payments.
Digital Divide between private and public entities. During this crisis the US government has had to write millions of old-fashioned paper checks for stimulus payments to individuals, and state governments have been swamped trying to process unemployment applications on 40-year-old computers running COBOL. This pandemic has exposed just how wide the gap is between the digital efficiencies enjoyed by the private sector and the aging inefficient systems used in the public sector. There will be tremendous opportunity ahead in fixing this.
Remote Health. Like distance learning, Telehealth has been around for several years but has been slow to catch on with physicians and patients. In the pandemic many have been forced to use Telehealth, and the opportunities in this space moving forward will be huge. There’s also a profound social impact angle, as large populations around the world live without close access to physicians.
Private Data for Public Good. One of the things that this pandemic has exposed is that in the field of public health epidemiology, contact tracing is an essential tool. And the organizations that have the data today are not public health departments, they are companies named Google and Apple. Figuring out how to make private data available for public good (without destroying privacy rights), will need to happen.
So that’s it. Those are my thoughts on trends in innovation methodology, marketplace trends, and how the global pandemic may change things.
For those of us in the field of entrepreneurship and innovation, it’s an exciting time right now. There’s more opportunity than I’ve seen before in my lifetime as a Silicon Valley guy, as we enter what the World Economic Forum is calling the 4th Industrial Revolution. There’s a lot going on, and the opportunities are huge.
Video of the webinar: