The Dual Transformation

I discovered Scott D Anthony more than a year ago thanks to a tweet of Nicolas Colin with a link to an excellent article of the Family (from Lone Inventors to Corporate Labs to the Entrepreneurial Age) and where I found a link to an also excellent paper of Scott Anthony ( The new Corporate Garage ).

The idea presented by Scott Anthony was quite interesting, his paper was saying that far from having the monopoly of innovation, the start-up were now very much challenged by big corporate which more and more were rediscovering the way to innovation. Being may be a bit too much in love with the start-up ecosystem of Berlin I found the idea refreshing. And when I heard that Scott Anthony had just published a new book I put it on my holiday agenda. I can only recommend you to do the same and read the Dual Transformation.

This would be my take-away of the book.

Dual Transformation = Transformation A + Transformation B + C.     Where:

  • A is reinventing today, repositioning your core business, running your core current business more efficiently,
  • B is inventing tomorrow,
  • C the capability link between A and B.

A Dual Transformation occurred when B represents at least 30% of the firm’s business and grows at a higher rate than A.

Transformation A

  • The What (service provided) does not change fundamentally but the How does
  • Finding more effective and efficient ways to address customer needs to maximise the resilience and relevance of your historical core business
  • Often painfully difficult to change the way you operate
  • Key1: determine the defensible postdisruption job to be done
    • What can we uniquely do for customer? The job to be done
    • Peter Drucker 1964: The customer rarely buys what the company thinks it sells him. One reason for this is, of course, nobody pays for a product. What is paid for is satisfactions.
    • Read: Competing against Luck – David Duncan
      • Why have people historically bought from us?
      • What do we provide that they really care about?
      • What is the disruptive shift in our market?
      • What used to matter to them but doesn’t really anymore?
      • What do they wish we could do that we don’t?
  • Key2: Innovate your business model
    • Create the right value for the customer, deliver that value as efficiently as possible, capture sufficient value to fund investment in future innovation
    • Particular attention to 5 key elements of the business model
      • Production: what did we do that we can now outsource? What did we use to outsource that we should do?
      • Distribution: can we go direct? Use a different distribution channel?
      • Customer support: can our customers support themselves?
      • Revenue model: can we wrap services around our product? Products around services? Could a freemium offering drive usage? Can we shift from a one time purchase to a subscription model?
      • Pricing model: how frequently should we charge for our offering? How should we charge?
  • Key 3: determine and monitor new metrics. If no change of metric necessary it means there was no real Transformation.
  • Key4: implement aggressively : you know the what is needed (you know there is a market), you only change the how, then be quick and straight
    • Heavy, hands-on involvement by top-level management
    • Bring in special purpose talents
    • Careful management of sales and distribution

Transformation B: creating the new

  • From 1950 to 1980 85% of disruption was created by start-ups, since 2000 40% is created by big corporates
  • Transformation B is about:
    • Identifying problems that the target customer historically has wanted to solve but can’t
      • identify constrained markets, make the complicate simple, the expensive affordable
      • identify consumption barriers
        • consumption pyramid: if consumption is concentrated on biggest clients, shows that market could grow through simplification
        • Consumption chain : where does the client step in to get the product? shows where added value is looked for, and where the seller could grow his service
        • Consumption map: where and when consumption takes place? If too concentrate room for disruption
        • Beware illusionary non-consumption: the best predictor of future behaviour is the past behaviour. If clients spent much time in trying to solve a problem, this is a good indicator, if they say the problem matters but their agenda says otherwise, you can expect poor consumption of a product which is not really wanted
      • Iteratively fine-tuning the business model to best the competition
        • Test and learn approach, no much time on theoretical analysis (no business plan survives the first confrontation with the reality)
        • Disciplined experimentation, test rigorously and adapt quickly
        • Make sure your experimentation has clear objective, build your assumption and challenge them by experimentation, structure the experiment such a way you can measure the prediction – discovery driven planning of Rita Mc Grath
          • First focus on deal killers, identify them and address them
          • Find the pivot points, when answers have a big impact of many pieces of a business
          • Build on confidence boosters
          • Doing so move toward white spaces but not to quickly
        • Using partnership, acquisitions, and external hires to accelerate the development of the capabilities necessary to win
          • A digital buyer needs a digital seller
          • Need of a balance of aliens (push you in the new direction) and diplomats (help negotiate bilateral relationships)

The Capabilities Link between A and B

  • Impact does not come from startup or unicorn, too much competition, too easy to copy, too difficult to scale up, impact comes from a big company which combined assets of scale with entrepreneur behaviour
  • Only way for incumbents to succeed with disruption is to create a separate organisation enjoying enough freedom. True, but still need interface.
  • C is the most difficult but most important part of the dual transformation. Dual transformation does not regard non related diversification, but logical expansion to logical new markets which were so far difficult to serve
  • Key1 , stock the link selectively with capabilities that will truly give you an unfair advantage over competitors
    • What truly gives you a competitive advantage in driving Transformation B? This is the only capability link that you should bring to Transformation B
    • To bring a non necessary capability (just because it is available) might hurt your effort in B
    • Transformation B is a separate entity, with a separate target market and a separate business model. Only after this is clearly established can the leadership of Transformation B clearly determine which capabilities of A will end up being a comparative advantage to B (which core capability do you have that a competitor would look at with envy?)
    • Then ask yourselves, when would Transformation B really need this capability link. To integrate them too early will slow down or even could kill your Transformation
  • Key 2 : manage interfaces strategically
    • Develop systems A and B with different rules
    • Create a formal exchange team
    • Institute transfer pricing – only on true capabilities link
  • Key 3: actively arbitrate between A and B
    • Conflicts between A and B are inevitable and have to be arbitrated, and … help B

Leading Dual Transformation

The Courage to choose, after an objective analysis of the risks facing your current activity:

  Sign Low Risk Moderate Risk High Risk
Stage 1:

Circumstances

Customer loyalty Stable or increasing Slow decline Rapid decline
VC investment Little or none Substantial seed and early stage Substantial growth activity
Stage 2:

Catalysis

Policy change Little or none Under consideration or discussion In the process of being implemented
Industry entrant activity Little or none Growth at low end or fringe of the market Entering or present in the mainstream
Customer habit shifts Habits are stable Change at the fringes Change in the mainstream
Stage 3:

Impact

Business Model innovation Entrants optimizing existing business models Entrants experimenting with different models Entrants successfully executing different models
Profit Margin Stable or increasing Slow decline or increasing due to cost management Rapid decline

The clarity to focus

  • Chose and go for the moon shot – structured vision and decision
  • to innovate is to say no to thousands of possibilities
  • Step1 : determine your growth gap (do not spend more than 2-4 weeks on that)
    • Set a target – min at 3 years, if poss in net income
    • Estimate the potential of current operations
    • Estimate the potential of current investments in new growth
    • Calculate your growth gap
  • Step 2 : determine goals and boundaries
    • What type of service should you consider?
    • How much are you willing to spend pursuing new opportunities?
    • How long are you willing to wait before a given idea has an impact?
    • What geographies should you target?
  • Step 3: determine your strategic opportunity areas
    • Where to play?
      • What? Who? How? Why?
      • A 60-90 days exercise
    • Adopt a future back mindset – do not foresee the future by extrapolating the present.

The conviction to persevere: readiness and management skills to go through 3 expected crisis: Crisis of commitment, crisis of conflict, crisis of identity.

Dual transformation is a long journey, it took 10 years for Apple, 15 for Xerox.

Uber, the world largest taxi company, owns no vehicle. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer has no inventory. And Airbnb the world largest accommodation provider has no real estate. Something interesting is happening.. (Techcrunch 2015)

 

 

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Seed / VC in Berlin

This is by far not a comprehensive list, but nevertheless a first approach:

  • Atlantic Internet
  • Bertelsmann Digital Media Investments
  • Blue Yard Capital
  • B to v Partners
  • Capiton Neuland
  • Cavalry Ventures
  • Cherry Ventures
  • CP Venture
  • Digital Health Ventures
  • DN Capital
  • Early Bird Venture Capital
  • E-Ventures
  • High-tech Gründer Funds
  • HV Holzbrinck Ventures Adviser GmbH
  • IBB Beteiligungsgesellschaft
  • Join Capital
  • KRW Schindler
  • Mama AG
  • Metro Accelerator
  • Parch Ventures
  • Peppermint Venture Partners
  • Point Nine Capital
  • Redstone Digital
  • Rocket Internet
  • SB21
  • Sechstar Metro Accelerator
  • Tengelmann Ventures
  • WestTech Ventures
  • XLHealth

Berliners always complain that they is so little money in town, naja for the third year in a row Berlin is before London in terms of investment raised by startups…

 

Enjoy the Ride!

Conscious Fintech, let us wait for the second thought.

There is a new FinTech meetup in Berlin, called Conscious Fintech, I like the name, and the subject. The name of the place is not bas neither, Impact Hub. Then I went to the first session..

I very much like the people, a fair diversity of profiles. I like the organization, original and inclusive. Great. I was more critical on the content, but having staid passive, I should not criticize too much.. I found that we heard much about social engagement or charity, but not enough about conscious fintech. One speaker even suggested to drop the term fintech. A bit pity because the subject is in my view absolutely key, and very much timely.

We saw with bitcoin few years ago the birth of a crypto currency anarchist movement, willing to defy a world run by public authorities totally discredited by the 2008 crisis. Although they so far did not yet fully deliver the alternative finance system they promised to build, you would meet some bitcoin anarchists still telling you that bitcoin does not need to bother with any particular conscience issue. Freedom is the word whatever the collateral damage. Well I pretty share the anger against the official bodies which so much failed, and continue to fail, but no, the freedom to harm is not for me the price for freedom.

The Fintech wave also promised to destroy the old financial industry and to replace it by a new decentralized but still global platform made of thousands of gentle Fintech apps. I loved the idea, and dived into it, but my goodness I am time to time shocked by some business models, where the new technology touch is just there in order to better serve the brutal greediness of the young founder… Thanks God it is by far not the majority, but well this is not exactly the new world I am dreaming about. I even dare to say that the psychology, if not the look, of some young VC executives remind me some aspects of the worst caricatures of some bad examples of the investment banking industry….

Then yes we have to influence this Fintech wave, and monitor this wonderful blockchain promise in order to make sure that the new world is worth building it. Rabelais, one of the greatest French humanists of the XVIth century said that science without conscience was the ruin of the soul. Maybe not the best cultural reference for our young techies but well 5 centuries after we are still there.

I wish this new Conscious Fintech would be able to bring its contribution to this important venture, but then it should be really work on the Fintech part of the equation. The challenge is really to bring the good souls and the fintech together in order to suggest maybe a new governance, maybe the emergence of new trusted and legitimate authorities, or some Key Conscience Indicators to be invented? Let us open the debate, but to be efficient and have some impact, let us be more consequent and move from the only sympathetic good sentiments.

Blockchain, Legal Tech & Private Law, is there any bold blockchain lawyer around?

Blockchain & Legal Tech was the title of a presentation made by Florian Glatz last Wednesday at the Blockchain Meetup in Berlin. I very much enjoyed the presentation and then my discussion with Florian. He is naturally fascinated by his subject and realistic enough to doubt that Legal Tech could cover all the complexity and room for interpretation that so many legal issues offer.

But more than a pure new tech way of solving conflicts, I am very much interested in seeing a legal framework emerging around the blockchain ecosystem. Some Bitcoin defenders would loudly pretend that we do not need any law and any rule, since the bitcoin architecture means willing to be aside the traditional legal order. I find the viewpoint sympathetic but a bit short in order to help all the blockchain Dapps to scale up. Regulation and legal environment is in fact today the biggest hurdle for many Prove of Concepts which are already sleeping in many computers, waiting for clearer legal frameworks. We urgently need to bring legal confidence to our entrepreneurs and disrupters.

If I am not a Bitcoin fanatic, I am not conservative enough neither to be satisfied with the term of ‘’law’’. I even fear that a Law or a Regulation will come from the heaven before the blockchain community would have suggested and written its own rules to solve the unavoidable conflicts on our global blockchain platform.

General Terms & Conditions are here insufficient, we need a Blockchain Laws, to be used by new courts, certainly a kind of international Blockchain Arbitration Court, totally independent from any governmental or official body. To be legitimate in the blockchain world this rules and courts should come from the Blockchain community itself.

It is amazing how the lawyers speaking about blockchain and law, immediately refer about the importance of the Private Law in the history of the current legal system. Great reference to their great predecessors, but I am still looking for the young lawyers willing to write today the private law that we need for the blockchain community. It would be a shame to wait that the incompetent regulators and members of Parliament decide to edict their law on the blockchain world.

Blockchain is not only a fantastic technical possibility; it is also a tool which will shape a new society. Should we be passive this new society could quickly look like the one foreseen by Orson Welles. If we really want to use the possibilities of this technology to create a better world, both global and decentralised, aside the current official bodies which lost their credibility in the 2008 crisis, then the Blockchain community should be consequent and quickly gather the first stones of this Blockchain Private Law.

Beyond our current fears a strong case for digital democracy

We can very much regret the rise of the far right in France and in too many other European countries. But the naive European federalist democrat who I am, wonders if we should not also thank these bad stinking old ghosts for showing the total failure of politics in France and in too many other places. Insecurity, unemployment or poverty are not the only reasons for the far right to prosper. The old and totally unadapted political system in France and other places also very much contributes to this disgusting brown wave.

Fake representativity, pure communication games, denial of reality, permanent lies and demagogy, self-interest of a political caste, and this over approx 30 years, no wonder that the French people finally decided to push the clowns away.

Well it could be also the right time to think about what should be democracy in the digital age.

I had the chance to participate a few months ago in a workshop organized for the MIT Innovators under 35 on this very topic. People coming from many different countries, but amazingly we all agreed. To condemn the weakness of our current political systems and to call for a new one. Ideologies are gone and therefore you do not feel you belong to one particular camp anymore. There are no camp any more, or they are so much fragmented that you cannot stand on them. The today’s debates (on Europe, on immigration, on environment, on the transition to a new economical order, …) dramatically split the existing old parties. It is then impossible to identify yourself with a political party or to trust one for representing your opinions.

People are now less keen to fight for ideologies but need very concrete solutions to concrete problems. This evolution might also come from mature and fairly recent consumption habits: the today’s consumer is not anymore the easy consumer of the 60s, he or she demands transparency on the offer, possibility to compare and analyze, quick delivery, after-sales service, reimbursement or change in case of non satisfaction. Politics should now deliver the same. We do not care about the noise made or the brightness of the brand, we care about the efficiency of the solution.

We want the politician to be a true project manager, fully dedicated to the emergence and then implementation of the solution to our problems. We do not trust any more these politicians supposed to know everything, and supposed to have solutions for everything. But more and more we trust the crowd, because we know that within the crowd we find this fantastic mix of expertise and users feedback, which is so efficient to shape what we need. Then we just have to know how to take the benefit of this. This is the new assignment of politicians.

And we have now the technology to deliver this, to mobilize neurons, to control the process and implementation. This is where Digital platforms come, not to mention blockchain ones.

Well this is for the prospect, but before entering too quickly into naïve and then false systemic dreams, or before offering too easy food to hungry politicians desperately looking for new words, let us build modestly our proof of concept and MVPs. Let us test this on few local pilot projects. in order to build the new age of democracy on more solid legs.

And let us remember that technology is void and can even be awfully dangerous if not inhabited by a true soul. Ours is humanism.

We are the Crowd!

The SolarCoin intends to reward the production of solar energy, very much appropriate isn’t-it?

I discovered SolarCoin last week and I find it very interesting. Solar Coin is a crypto-currency designed to reward production of solar energy. You get 1 SLR for free when you produce 1 MWh of solar energy. A bit short? No this could be really awesome.

For the time being 1 SLR is approx. 1.3 cent worth, i.e. almost nothing, but nothing to worry neither since the story did not really start yet. In fact it started one year ago and miners already produced 34,2M of SLR for a value of approx. 460M$. Now that this first basis has ben produced, the concept could be marketed, and then investors will fix the value of the SLR, hopefully giving some real value to this reward coin.

Let us come back to the idea and to the context.

The context is multifold:

  • I agree that it is tempting to create alternative currencies just to by-pass states, which so poorly behaved before, during and after the 2008 crisis. And beyond the story of the crisis I believe that the future will more belong to communities than to states, then the states should logically lose the monopoly on the currencies.
  • We see with Bitcoin that a currency can not be only a new asset class offered to investors. Volatility is too high, and we need transparency, an accepted regulation, as well as more underlying economic added-value.
  • This is why I follow with big interest Ethereum, which could become a global & transparent platform where economical value is created by millions of DAPPs
  • But SolarCoin shows another interesting route to create the currency of a community, which shall create and reward both economical value (solar energy) but also environmental added value at a critical time for the planet. We could imagine that SolarCoin becomes a formidable instrument to encourage solar energy everywhere in the world, replacing state subsidies that the states are no longer able to ensure, and delivering also important incentives for very small private producers, individuals in emerging or poor countries. Doing so it may also render useless the investment in big energy infrastructures in Africa for example. In one word we could have then a triple virtuous circle, economical, environmental and social. A good story for investors and a good story for the planet.

The idea is to use the advantage of the blockchain technology to get the self-registration, and then the control, on a total decentralized but transparent manner, of the various units producing solar energy, from the smallest to the biggest ones.

I do not see Solar Coin as a currency with a very long future, as soon as the solar energy will have become the main source of energy and will be produced by very low cost technology, the SLR may become less attractive and even irrelevant. However it could be a fantastic instrument for accelerating this transition toward the solar energy area. And therefore we need it very much.

Everything is still to play for, Solar Coin has to show it has the team to implement the concept. A key point is also to deliver an attractive and easy interface on smart phone in order to gain the success it could pretend everywhere in the world.

To be followed with the highest attention, and hopefully the relative silence on reddit or other forum does not translate the fate of this exciting idea.

I naturally downloaded my SLR wallet.

Banking communities connecting other communities

Banks will not make it just by modernizing their products and process. Banks should first understand the role they should play in the new economy or better said in the new society or in the new city . It will be a slow and then brutal transition. Some could even imagine that banks would disappear, the financing functions being redefined and assumed by new or other actors. Some dream about a global open platform, where financial functions will be delivered almost for free by highly specialized decentralized applications, covering all the financial needs through a unstructured network. And this is certainly why the Ethereum project is so much interesting and so much promising or why the connections between Number26, Vaamo and Transferwise are also worth following. Other would bet on the adaptability of some of the old banks, made suddenly so young by the cloud of Fintech gathering or cautiously entertained around them.

Each of these scenario is possible and in fact realistic since none of them excludes the other ones. Tthe banks which shall survive might also follow different paths, however I very much believe in the chances of those able to let develop inside their own organizations agile communities of new adopters. There are plenty of geeks and of visionaries in our old dinosaurian banks. They have to establish themselves as positive and acting communities.

The survival of the banks does not lie in traditional leadership, or impressive restructuring plans sustained by cathedrals of brilliant slides, which usually … destroy both the exhausted staff which delivered them and the value of these too clever institutions. No the active interest, if not the real passion and willingness to do of few visionaries might be much more important for them. But to succeed these communities have to organize themselves in order to deliver something more concrete than nice ideas. A lot of banks already understood that the creativity of their own staff might be one of the key path to innovation.

These internal communities should promote a dynamic which should allow them to grow and then to multiply the connections with the external communities, Fintech but also IoT, AI, Smart Cities etc. This is the full connection between all these communities which will give a future to banking. And this is fascinating to touch these realities.