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Change management
Disruptive changes: What successful companies do differently.

Table of contents

Industry 4.0:

8 tips for dealing with disruptive change.

If you don’t move with the times, you move with the times

Industry 4.0. – What is in store for us?

Since the turn of the millennium, the number of revolutionary changes that have affected all areas of our society and economy has increased. Who would have dreamed of such developments? Who would have believed in the year 2000 that today every student would have a powerful computer in their pocket that shoots videos in HD, acts as a navigation system and can be used to listen to music on demand? And according to some experts, we have only seen a fraction of the changes that lie ahead.

Under the keyword Industry 4.0. the next industrial revolution is on the horizon. “Internet of Things” is the buzzword that describes the seamless integration of objects into the information network. The Internet connects with intelligent machines, systems and processes to form a powerful network. This turns the real world into one huge information system.

The fanatics of the past are the market leaders of today.

The essence of revolutionary – disruptive – changes is that they make existing products obsolete with their innovation. Who needs calendars, dictaphones, cassettes, cameras and compasses these days? From today’s perspective, we can see that there have been other developments than we expected in the past. And with Industry 4.0. the speed of change will increase many times over.

But how can we prepare our companies for such unexpected and disruptive developments? How can we be among those who have been there from the start? There are two options: We can wait and see what the next few years bring and then react to changes. Perhaps it will then be too late… Or we ourselves can be among those who shape future changes.

>>> Read here: How super-entrepreneurs turn an uncertain future into success.

You can shape the future!

To achieve this, we need to take care of the future here and now. Trend researcher Lars Thomsen reports that less than 1% of a CEO’s working time in the USA is spent thinking about the future. So it’s no wonder that many a company has overlooked the signs of the times and been left behind by new technologies. And worse still, it killed them.

A prominent example of this is Kodak. The company was the world market leader for 100 years. As recently as 1990, it was ranked 18th on the Fortune 500 list. Who could have guessed that it had to file for insolvency back in 2012? Kodak itself had provided the reason for its downfall: It developed digital photography. However, it underestimated their future successes. In the beginning, digital images were of poor quality and low margins were expected. But the masses of consumers quickly became enthusiastic about the new technology: you could simply copy the pictures, print them out, edit them, take many more photos and save on film and development. Most people could do without professional quality, as the simplicity and low price quickly outweighed this disadvantage. The fact that Kodak did not give the new technology any room to grow and that others occupied the new market ultimately brought the giant Kodak to its knees. The disruptive impact that new, groundbreaking innovations can have on existing companies has earned them an unflattering name:

Disruptive technologies (disrupt – to interrupt, tear apart)

Disruptive technology refers to new products, services or business models that replace existing ones, just as the car replaced the horse. They are causing market shifts. These innovations are not improvements on old technologies, so-called evolutionary innovations. They are radical innovations because they start from scratch and thus open up a new market. Harvard professor Clayton M. Christensen first introduced the idea of disruptive innovation in 1997 in his book The Innovator’s Dilemma. Why established companies are losing the competition for groundbreaking innovations (ISBN 978-3-8006-3791-1).

In this video, Professor Clayton M. Christensen explains his theory in English (7 min):

Examples of disruptive innovations

From cassette & CD – to Spotify

From travel agency – to online booking

From the gasoline engine – to the electric car

From fossil fuels – to wind and solar energy

From bookstore – to amazon e-book

Why many large companies oversleep change and reject disruptive innovations.

  • In the beginning, new technologies are not good enough.
    They perform particularly poorly in comparison with existing technologies. The first electric cars were difficult to charge, only drove short distances and were very expensive.
  • The innovations are not initially profitable.
    The newly developing markets are not generating the usual profits. These products are therefore not used.
  • Often a completely new business model has to be developed.
    This can be observed in the music industry: The sale of physical sound carriers works completely differently to the online music flat rate. This jeopardizes the existing structures. Few people feel like putting themselves at risk.
  • Key Performance Indicator:
    Old measuring instruments used to measure the success of existing technologies cannot properly capture the new technologies and rate them as unsuccessful.
  • The innovation is seen as“cannibalization
    and fears for the existing business.
  • Old and new compete for resources.
    The existing, successful business model usually wins this battle.
  • The corporate culture does not allow for radical innovations.
>> Read here:
Professions with a future – will your profession still exist in the future?

Once the disruptive innovation has been recognized – what then? Or: Simply repurposing does not work.

When online retail was in its infancy, Otto Versand made some mistakes that almost cost it its existence: Previously, it had published an extensive catalog and people ordered by phone. Initially, Otto was too slow and inflexible for the necessary comprehensive innovation. The catalog was put online as a large file and people were waiting for orders – by phone and postcard. But the old approach did not fit in with the new Internet environment. It wasn’t until around 10 years later that Otto also made it. In 2008, Otto-Versand sold more online than through the traditional catalog business for the first time. How did that work? A completely new division with new employees and new structures was established parallel to the old business.

Daimler, on the other hand, was exemplary in its approach to a potentially disruptive innovation – car sharing. A completely new unit was founded – Car to go. With a completely new corporate culture: colorful, young with a flat hierarchy and little structure, the subsidiary Moovel differs considerably from its parent company – structured, with a large budget, clearly defined processes and strong hierarchies. Car to go started small, with its own budget and new culture and was thus able to work towards its success in a new area without being measured against the parent company. New structures for new ideas – it worked!

An entertaining 5-minute animated film by Queensland University of Technology Science and Engineering Facility, Professor Robert Perrons on the topic of disruptive technologies. In English language:

8 things that make it easier for your company easier, disruptive drive innovation:
  1. New units or even a new company.
    Establishing a separate unit with a new structure, at best a spin-off, makes it easier for innovation. Corporate structures are not suitable for driving disruptive innovations. People don’t like change. We need small, flexible units that can react flexibly to changes and are open to new ideas.
  2. Business model
    A completely new business model should be considered that fits the innovation. For example, in the course of digitization, some daily newspapers have started to give away their actual services, such as Spiegel-Online. They earn money in completely different places.
  3. No comparisons with the “old products”.
    In the beginning, no or small margins are the rule. This is why a new technology initially performs poorly in comparison with the successes of the existing technology. The new technology needs its own key performance indicator in order to have a chance of making its success measurable.
  4. Resources
    It is important that there is no battle for resources, because otherwise the departments that have been successful so far will win this battle and the one that has yet to be developed will be left empty-handed and cannot develop any further. Shared resources require consistent rules as to which part of the resource is used for the innovative branch.
  5. Own budget
    Budget has to be invested in the new field and that takes courage. Not everyone has that – and runs the risk of falling by the wayside. It makes sense to define a budget in the amount of the “maximum affordable loss”. (see the effectuation approach) If the risk of failure is factored in from the outset and this seems tolerable, a lot of pressure is taken off innovation and the freedom to innovate is increased.
  6. Employees
    The existing employees often don’t want to come along. You want to maintain the existing structures. There would be a high risk that existing employees would block the change. This means that it is often new people from outside who will drive innovation forward. This can create a new corporate culture with a different speed and a different mindset for a different clientele.
  7. Continuous improvement in quality.
    Particularly at the beginning, you should focus a lot of capacity on the further development of the new innovation so that it quickly emerges from its infancy and becomes profitable. The faster this happens, the greater the likelihood that the innovation will be successful.
  8. Tipping point
    We need to work towards the tipping point – the trend reversal point. This is the point at which the new technology becomes cheaper than the existing one.
    This point will soon be reached with electric vehicles.

The best precaution: a culture of innovation.

The best way to stay abreast of innovations is to remain flexible yourself. But how does a company remain changeable? Through a culture that embraces change because it loves new things.

One example of this is Google. Google has managed to create a corporate culture in which people feel comfortable and free and are open to new ideas. Structures and hierarchies are abolished as far as possible so that they are not maintained. Google does not need change processes, but lives constant change. The daily new is everyday life. There is room for innovation here. There is a reason for this focus on change: it is rarely the top dogs who drive new things forward. But the newcomers are dominating the future. And whoever recognizes, develops and establishes a disruptive innovation first, i.e. is the first mover, is the one people come to. This means that you should be the first to develop this advantage – the first-mover advantage. As the saying goes: the early bird catches the worm.

>>> Continue reading here: 10 simple tips on how to promote innovation in your company

This article is our contribution to the blog parade “Industry 4.0: Opportunities, risks, ideas and implementation – what does Germany have to offer?”. There you will find further articles from various bloggers on the topic of Industry 4.0. We would like to thank the organizers – the Futability-Blog in cooperation with the Ingenieurversteher-Blog – for allowing us to participate!

Articles on the topic on the net:
http://www.economist.com/node/21542796

Take a look at our website:
www.berlinerteam.de

We look forward to seeing you!

The authors

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Oliver Grätsch
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Michelle Templin
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Christian Grätsch
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Matthias Beikert
Susanne_Grätsch_1_550x550px
Susanne Grätsch
Monika Bt 550x550
Monika Steininger
Kai_Hübner_550x550px
Kai Hübner
Philipp Andresen 500x550
Philipp Andresen
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Dr. Claudia Schmidt
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Inga Kühn
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Kassandra Knebel
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Claudia Lehmann
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Anna Isabell Arendt
Komplettes Team

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