Kathleen Goolsby, a writer for Sandhill.com, has posted a very interesting piece of her interview with C.K. Prahalad entitled C.K. Prahalad on the New Age of Innovation. Prahalad is a noted author and current Distinguished Professor at the University of Michigan specializing in corporate strategy. Prahalad’s new book, The New Age of Innovation, is prescient and lays out his vision of a new business model and how IT and the influence of consumers will shape the enterprise’s approach to competitiveness in the future. Her article is not the typical interview peppered with questions that break up the flow of thought. She deftly asks the right leading questions and allows the author to expound on his thoughts and ideas.
The interview begins with Prahalad laying out his vision for the future of competitiveness in the coming decade. He has identified 4 trends that are converging in a way that will change the way we think about value creation. These 4 trends are:
• Connectivity: This is the foundation of the coming shift in the paradigm, be it through PC’s or cell phones.
• The Cost of digitization is declining and so deployment across borders becomes more attainable.
• The convergence of technologies: “Is your cell phone a telephone, a computer, a camera, a watch or all of the above?”
• The emergence of social networks.
Next Prahalad explains that there has been a shift in the balance of power between the company and the consumer. It is the consumer who has as much, and in some cases, more power than the enterprise. The enterprise of the future will not need to own the resources, but rather have access to a myriad of resources from around the globe. Each consumer is unique and each consumer decides his or her content (i.e. “co-creation of a personalized experience”).
“Co-creation means two joint problem-solvers: the company and me. And it is about experience, not about products. So we have a co-created, virtualized experience real value instead of a product-centric real value.”
He explains that this is not a supply chain sequenced approach. There is no pre-positioning of activities. The enterprise must have access to many vendors in numerous locations in order to fulfill the unique customer request.
Goolsby asks the author to give concrete examples of how this new business model is working today. I must admit that Prahalad details some excellent examples. However, when I read the article I noticed one thing that was conspicuously missing. His business examples all dealt with services. His first example describes how a health insurance company is now able to insure people in high-risk categories with chronic conditions that require expensive medication on a continual basis. His second example dealt with how a fleet management company of helicopters, jets, and other modes of transportation, with numerous customers requiring various services was able to cut its costs. But what about manufacturing? Won’t there still be a need for supply chain management with a predetermined sequence or positioning of activities and vendors. I’m sure that the non-service industries will also be able to benefit from the 4 trends identified above, but I am not exactly sure how they fit into his new business model.
Prahalad goes on to say that enterprises must rethink their approach and realize that IT becomes a strategic asset. Every company will be able to differentiate itself because now they will be dealing with personalized consumer experiences and not a commoditized product.
Finally, Prahalad puts forth the premise that enterprises will have to become consumer-centric global businesses and our IT systems must move to become citizen-centric public services. I will tell you this; he had me until I came to this last part about consumer-centric and citizen-centric. I began to think about “One World Order” and thoughts of all of us wearing that same gray Mao suit. When he got to the point of stating his vision of “a platform as an ecosystem of large and small companies working together to common shared standards”, he lost me. For me I began to view his discussion not in terms of IT and innovation, but rather as a quasi-political statement. Maybe it is the coming election and my mind jumped from business to politics, but it just didn’t sit right with me.
