Last week, I delivered a keynote address at TIBCO’s annual conference. This year's conference focused on disruptive innovation, not least because TIBCO’s CEO (and one of Nielsen’s board members) Vivek Ranadivé launched his entrepreneurial career in the late 1980s with a “disruptive” piece of hardware. His “messaging bus” made it possible for multiple applications to receive and process data at the same time, breaking the status quo.
Now, however, TIBCO is an established company, and it faces the challenge all established companies, including ours, must address: How to find the next disruptive innovation while reacting to the disruptive innovations of others. To use the language of the conference, how can one “ride the disruption wave”?
Obviously, this is an enormously important topic for us. For instance, what we at Nielsen call media fragmentation is in fact an ongoing process of disruptive innovation. And it presents us with both challenges and opportunities—namely, the struggle to avoid being disrupted and the chance to be creatively disruptive. The secret, of course, is to do both at once by being good at disrupting ourselves.
Throughout our existence as a company, we’ve done this well. Nielsen is a 91-year-old company, but our history is really that of a sequence of different companies, each evolving and emerging from the previous one. By renewing and remaking ourselves, we’ve not just survived, we’ve thrived. And we are in the process of doing it again, as we evolve into a more digital company.
What does it take to disrupt yourself before you are disrupted? There is no formula, of course, but I've found three things can play a big role:
Trimming waste, increasing efficiency, and innovation. Trimming waste is my favorite way to think about increasing efficiency. Processes that trim waste pretty much always succeed, because they are advantageous not only to the immediate beneficiary, but also to the broader market. In fact, trimming waste often expands markets.
Naturally, as we look to trim waste, we begin with our existing products and processes. It’s a good place to start, but it’s typically not enough. In most cases, big efficiency gains require innovation. Put another way, serious innovation almost always makes some existing process much more efficient.
Sometimes this observation is obscured because the innovation—a new product or process—seems so different. Take the automobile, which must have seemed like a wonder when it was new. Really, it was just a better way to move things and people around—a wagon made of steel instead of wood, with an engine instead of horses to pull it.
But what an efficient way of doing it! Henry Ford introduced many waste-trimming product innovations along the way to achieving his dream of making a car “for the great multitude.” His most important product innovation, however, was the simplest: standardization. In 1913, Ford decided that his models would come with no options. This made possible Ford’s greatest process innovation: the large-scale, moving assembly line, which ultimately reduced the time to build a car from over 12 hours to less than two.
How much waste did Ford trim? His innovations allowed him to drop the price of the Model T “Runabout” from $825 in 1909 to $260 by 1924. This allowed him to create the mass market he needed and a staggering amount of value along with it.
So Ford offers a great example of both product and process innovation. But he also offers an important example of what I noted above: Trimming waste generally expands markets. When waste is trimmed from a process, we often get more of that process, not less. That’s one of the reasons why innovation is the lifeblood of an economy. Many people think that if something becomes cheaper to make, and cheaper to sell, total spending will decrease. Usually, the opposite is true. In total, much more was spent on cars when they became relatively cheap than when they were expensive.
Shifting power from the center to the edge. In big companies, the natural tendency over time is for power to gravitate to and accumulate at the center. But that is the opposite of what we need in a world of growing complexity and speed. In a big company, a CEO and the team at the center can't know what is going on at every point along the edge. That’s why we should always be working to push power and decision-making closer to the edge, closer to the market, closer to the clients, closer to the action. When we do this well, our teams are faster, more innovative and more energized.
This is not a new idea. Even government gets it. For instance, the city government in Austin, Texas, puts lots of data on its website so anyone can use it to develop apps. Someone tapped into that data, creating an app to run on the city’s “Dangerous Dogs” database. Today, you can set your smartphone to start barking when you are near the home of one of the city’s dangerous dogs. Really! This is not an app that would have been developed at the center. It’s a fun—and good—reminder of why we should always be working to counter the natural tendency for power and decision-making to gravitate to the center.
Non-zero-sum thinking. People often think of business as only a zero-sum game. Now, it sometimes is a zero-sum game. For instance, in the world of marketing, so much effort goes into Brand A gaining share from Brand B, and then, tomorrow, Brand B wins it back from Brand A again. But most of the time, all this happens with no effect on the overall market.
But if Brand A trims waste, creates efficiency and increases the value it offers, then not only does Brand A grow, but the whole market grows and gets a little better. In response, Brand B trims waste and the market improves again. And then Brand C, Brand D and so on. Every time, the market gets a little better…each time making the pie a little bigger for everyone. Trimming waste is rarely a zero-sum game.
Non-zero-sum games are great because there’s something in it for everyone. The idea comes from game theory, and it means that for every winner, there doesn’t have to be a corresponding loser. And it’s not just about trimming waste. Taking a larger view, it is often about cooperating. You all know how the Prisoner’s Dilemma works—game theory’s most famous “game.” If two prisoners, interrogated separately, betray each other, they both go to prison for a while. If one talks and the other remains silent, the silent one goes to prison for a long time, and the talker walks free. So the temptation is to talk. But if they both keep quiet, they both go free. That is, they get a non-zero-sum outcome if they cooperate at the right moment.
This also highlights the fact that non-zero-sum thinking is hard, because cooperating requires more confidence, leadership and trust than a purely competitive model does. It requires a willingness to be vulnerable. It requires sharing. But the key is to look for the right moment, seize the opportunity and take the plunge. The good news is that “games” of this sort usually have more than one round, giving each party an incentive not to do the selfish thing. Imagine if the prisoners had to play the game 10 times. Don’t you think they’d eventually see that cooperation was better for both of them?
Of course, in a competitive economy, companies can’t cooperate all the time. For instance, you generally won’t choose to cooperate with your competitors on something fundamental to your competitive advantage. But just about everything else (this side of antitrust laws, of course) offers opportunity. And we should always be looking for that opportunity, because there is clear evidence that the winners—not just in business, but in the whole of human history—are those who learned to cooperate at the right moments rather than simply competing all the time.
There is a book I like by Robert Wright, called Nonzero: The Logic of Human Destiny. Wright details many examples throughout history of how societies did better if they cooperated on occasion. In fact, most of the major civilizational steps forward are the result of groups discovering or pursuing a non-zero-sum solution to a problem.
This is enormously important for us today given the growing complexity of the world around us. Wright says complexity heightens the need for cooperation.
So here is my fearless prediction: In our business, as we face the growing complexity inherent in the challenges of digitization, hyper-connectivity and accelerating change, it will be the non-zero-sum, cooperative solutions that will enable our biggest steps forward over the next several years.
The TIBCO conference explored the opportunity offered by the Big Data world we live in today. But we won’t realize this opportunity to its fullest if we don’t move forward with cooperation. None of us will always have all the data we want. Pockets of data will be found everywhere, and everyone of course will want access to all of it—without sharing any of their own data. That is zero-sum thinking and will lead to nobody sharing. It won’t end well.
To avoid that outcome, we’ll need a leap forward in “business civilization.” The leap forward for us and others is to adopt the mindsets and behaviors necessary to make this new world of Big Data work through more cooperation. I know it's difficult, but I am optimistic that it will happen.
History supports my optimism. To adapt a famous phrase, the arc of human history is long, but it bends towards progress—and that positive arc is, to a large extent, a result of those recurring moments of cooperation among societies, groups and competitors. In other words, we humans already have a long history of doing what we need to do. We just need to keep doing it.
So, coming back to the idea of “riding the disruption wave,” perhaps one of the most important forms of disruption in today’s world is, in fact, cooperation. It’s a little bit ironic, isn’t it?