The telecom sector is a good example of this. The arrival of the iPhone in June 2007 was a wake-up call. It swiftly made major manufacturers obsolete and reduced the role of intermediaries in operators’ customer relations.
Some former market leaders, such as Nokia or Blackberry bore the brunt of this, and several studies show that the current dynamic will result in half of the 500 leading global companies to disappear in the next ten years, at least from this league table, attesting to a staggering renewal rate.
For the start of the 21st century, historians will retain the far-reaching changes in the economy in which the key players are no longer manufacturers, energy companies and physical distribution services, but the famous GAFA (Google, Apple, Facebook, Amazon) in the West and BAT (Baidu, Alibaba, Tencent) in China. This revolution is on the same scale as the industrial revolution of the 19th century or the printing revolution at the start of the Renaissance period, but over a much shorter time span.
What is the “Digital Revolution”?
All organisations naturally use emails, the Internet, mobile devices, comprehensive high-performance information systems. This is no longer the issue at stake.
Yes, some direct gains of productivity are still on-going. But main upcoming gains are indirect: we are now talking about the revolution of economic players made possible by digital tools: exponential reduction in development costs for solutions, storage, processing, as well as marketing, communication and distribution. We are talking about a world in which the data production rate is exponential, and in which players in this field have taken on a key role in society or in their economic sector.
In fact, we could just as easily talk about the “Entrepreneurial Revolution” resulting from this reduction in costs, i.e. the millions of young and older entrepreneurs who are launching start-ups with low costs and grand ambitions. They have their bible, The Lean Start-Up, with its proven methodology: to identify a problem to be solved over a broad target market, source user requirements and insights, prototype, test, and launch a “minimum viable product”, then scale it as quickly as possible. They work very quickly as they only have resources for a limited time, and are often in a race with their competitors. They place their trust in collective intelligence by sharing their data and issues with all their employees in order to increase each person’s involvement and their contribution to their resolution.
In terms of statistics, some succeed by smashing value chains and shaking up established players: Uber for taxis, Blablacar for transportation, Airbnb and Booking for hotels, Criteo for digital marketing, Spotify for music, Netflix for TV… and of course this is only the tip of the iceberg as the trend is gaining pace and on an industrial scale. At this rate, there will probably be 20 times more companies of this type in 2020.
Start-up accelerators such as Y-Combinator and NUMA are playing a part in this industrialised phase.
By selecting teams wishing to take on high-potential markets, by giving them the methods and connections to leverage their project, they are in contact with hundreds of start-ups and increase their chance of success. Investment funds trust them and are more likely to finance a resulting start-up, which also favours its success. There are now more than 200 accelerators worldwide, around six of which, including NUMA, are present on several continents.
This Entrepreneurial Revolution is gaining momentum: an increasing amount of data is available (in particular via the Internet of Things), new ways of extracting value are emerging (in particular via self-learning systems such as “deep learning”), new architectures are appearing (such as Blockchains), which broaden the scope of this revolution. Other revolutions are joining in: that of transportation (electric and autonomous vehicles, drones, space, etc.), medicine (strong increase in life expectancy thanks to new technologies) and energy (which is becoming cleaner and decentralised), which boosts the “revolutionary” potential.
Which levers are now available for major companies?
Major economic players’ great wake-up call with regard to this (probably poorly named) “digital transition” is related to either an impact already observed in economic indicators or to observations of their competitors, their business areas or Silicon Valley. The denial and mourning phase is over for most companies and the emphasis is now on action.
They have considerable resources and expertise. They also boast tens or hundreds of thousands of employees who must be supported along this key shift.
Acceleration of development cycles
This implies short-term teams which accept the rapid launch of products not yet perfected. It also implies close attention paid to end users’ needs in order to deal with their problems. It requires a move away from unwieldy information systems and the use of the same tools and methods as start-ups. It implies quick turn-arounds and the design of rapidly scalable solutions. Smart growth methods must be rolled out (“growth hacking”). This often means changing their working framework as rapid innovation requires heightened collaboration and quick decisions. Many major companies have already started to implement this acceleration, but it is not always easy to reproduce the “sense of urgency” that start-ups feel, due to their limited resources.
In particular, towards start-ups, corporate investment funds, start-up accelerators. There are also more collaborations with other major companies, which can have a leverage effect on their own efforts. There is an awareness that you need an ecosystem to succeed: it is no longer possible for a major company to succeed alone. To be accepted in this ecosystem, you have to have the correct attitude and provide value, as it is tacitly unforgiving for players who do not contribute. Major groups have a great amount of value to provide to their respective ecosystems and many have got through this phase successfully.
Initiatives have been rolled out by almost all players today, with varying levels of ambition and success, but they have all started to produce effects:
- Creation of specific roles and departments (Chief Digital Officer, Innovation Division, etc.)
- Sourcing and project support structures with start-ups (roll-out of pilots, investment via corporate ventures, start-up accelerators on their business areas, etc.)
- Implementation of projects using start-up methods: hackathons, intrapreneurship
- Roll-out of start-up studios to develop projects using start-up methods
- Creation of R&D and innovation bodies aimed at start-ups, via organised events, challenges, etc.
- Creation of third places, open meeting places designed for agile and open innovation, used by Unibail Rodamco, MAIF, General Electric or Renault.
- A rise in user-oriented innovation (design thinking)
Even though statistics show that major groups have much more chance of success than start-ups when they launch new entrepreneurial projects, the return on investment cannot always be measured and we are still at the beginning of these new structures. Major companies are generally supported by bodies such as NUMA in the creation of these projects.
The European ecosystem is not merely a reproduction of the American ecosystem.
One of its strong creations is the increased collaboration between major players on given themes in order to solve complex problems together, and with start-ups. The Datacity project is a prime example: around ten major urban players have come together to define a dozen complex issues facing cities and they are enlisting start-ups to find solutions.
These projects are extremely powerful as major groups have the opportunity to discuss strong and complementary areas of expertise. They work together on non-competitive issues and offer start-ups, who relish the opportunity, the issues and data which have a significant potential for value creation. This collective drive is not yet visible in the USA.
What remains along the road?
In a situation where most major players worldwide are still playing catch-up to “GAFA” and other agile organisations:
Organisations and work methods which have not yet changed.
Offices are sometimes still closed off, organisation charts still pyramid-shaped and diaries filled with long meetings. It still takes several weeks or several months to achieve what a start-up, or an agile player, can do in a few hours. A great majority of teams still work exactly as they did ten or more years ago. It often takes three weeks to organise a meeting with the right people, and three months to obtain a decision or a budget, even for a project of strategic importance. In some cases, you even have to wait for the next financial year to get the go-ahead.
What is at stake with the “digital revolution” is therefore also the implementation of new working methods, inspired by start-ups, to a considerable proportion of the company, starting with the most visible departments.
One lever that is easy to use is the transformation of the work environment, as demonstrated by Société Générale at its new headquarters at Val de Fontenay, or Adeo at its headquarters in Ronchin.
In Europe, companies’ collaboration with start-ups is still at the courtship phase…
…while GAFA acquire hundreds of shares in start-ups each year and make dozens of acquisitions. This strengthens their enforcement capacity and creates unparalleled and highly virtuous appeal for the Californian ecosystem. Each year, Google invests more in start-ups than the top twenty European digital companies put together and buys out a great number of them. The aim is to acquire talent as well as technologies and agility. In Europe, acquisitions are much more rare, due to several factors: more fragmented target markets or Not Invented Here. Internal teams sometimes think that they are able to develop the solution by a start-up undergoing takeover talks for a much lower budget. Once again, the value of time is insufficiently taken into account here.
These two movements must be conducted together.
A takeover of a start-up has little chance of success if the corporate culture of the purchasing group is out of phase. Either the executives will leave very quickly, or the start-up will remain independent and will not produce all of the expected value. Similarly, a group needs to incorporate key talents from start-ups in order to change its operating methods.
And in 2017 at NUMA?
We are convinced at NUMA that entrepreneurs who have a strong sense of their mission will have an impact on the world’s complex issues by 2030.
This is because they work quickly and have the right approach. Our role is to support them, to give them the tools and connections to succeed. Their methodologies and sense of their missions can also be of use to major companies.
Since it was founded three years ago, NUMA has supported more than 120 organisations in this Digital and Entrepreneurial Transition, with the strong conviction that the first change to be made relates to culture. NUMA has assisted many companies on how to innovate like start-ups (Intrapreneurship, Start-Up Studio) or with start-ups (Theme-based Accelerators).
In order to support its partners more effectively in this change of working methods, NUMA has decided to go even further in 2017, with the following initiatives:
- By creating “NUMA Learn“, a training programme aimed at major companies wishing to embrace change, with a view of assisting forerunning teams, and also the thousands of employees whose working methods will be subject to change.
- By creating “NUMA Factory” to offer major companies its resources. The first example is Selecteev which enables starts-ups or teams to apply for challenges or selections.
- By launching theme-based acceleration, in “multi-partner” mode. As early as January, NUMA Mexico is launching an accelerator on the subject of healthcare with prestigious public and private partners. This is a first and will foster expertise and sharing in areas requiring specialisation.
- By replicating the success of Datacity in Paris and Casablanca in other cities because we are firmly convinced that this type of collaboration makes a lot of sense elsewhere in the world.
- By replicating Datacity on new themes, in particular the fascinating SmartCampus.
The team at NUMA practically doubled in size in 2016, and we are continuing to take on in 2017… those who will be the players in this amazing transition. We want to make NUMA an exemplary company :).