Third in a series by Ben Pring who co-leads Cognizant’s Center for the Future of Work.
“In our previous two posts (here and here) - we outlined the concept of “Code HalosTM” – aka our digital fingerprint – and discussed how “personal” Code Halos are migrating into enterprise computing. We also analyzed the areas in which “organizational” Code Halos are changing what businesses do and how they do it.
In this post we advocate how Code Halos create a repeatable pattern of disruption across a wide range of industries; by studying this pattern we have developed a business model – the Crossroads ModelTM – to help business and technology leaders understand the impact Code Halos have on winning and losing in today’s fast digitizing global markets. We also provide a “playbook” for executives to win in the new “code rush” and avoid the “extinction events” that so many once great corporations, from Kodak to Newsweek, have experienced in recent years.
A New Prism for Understanding Digital Disruption Has Emerged
In studying the rise and impact of Code Halos, we’ve recognize that vast industry transformations – and the resulting violent value migrations – in books, movie rentals, mobile phones, insurance, consumer goods, newspapers and travel services have all followed a similar pattern. This pattern is what we call the Crossroads Model. As companies and industries have experienced events explained by the Crossroads Model, three key events have occurred.
· The winners built Code Halos at an “atomic” level — oriented around people, processes, products and organizations — to create new value and experiences. The losers largely ignored the possibilities of deriving meaning from data, customer intimacy and the value of code, and instead continued to work on creating economic value primarily through the leverage of physical assets.
· Once Code Halos formed and grew in value with more data, they led to industry transformations that followed a very consistent pattern. Each industry shift has particular distinctions — whether in timing or the formation of particular Code Halos — but in each case, roughly 80% of the same model has remained consistent.
· The shift happened quickly. Once these trends were underway, the industry landscape shifted very quickly; there was almost no way back for companies that overlooked opportunities leading up to their particular Crossroads decision.
The Crossroads Model consists of five key stages:
· Ionization: A fertile context for innovation. The combination of changing economic pressures, enhanced customer expectations and new technologies creates a context and environment for the establishment of Code Halos and related new business models.
· The Spark: Where Code Halos collide and business changes. Once Code Halos emerge, associated algorithms are then developed. New ideas and offerings are then formed, based on the intersection of Code Halos. An innovative “Spark” then quickly reshapes processes inside the enterprise, as well as at the customer interface.
· Enrichment: Turning a Spark into a blaze. This is the period where Code Halos — if created and managed correctly — grow in both the numbers of users and the value of data by orders of magnitude, giving rise to new products, processes and models for value creation.
· The Crossroads: Where markets flip. This is a compressed period of time — often between one and three years — where industry leadership shifts. At the Crossroads, Code Halos have reached critical mass and are creating new customer expectations and economic models. This drives a rapid, sometimes violent, swing in reputation, revenue and market value.
· The New Code Rush (or Extinction Event). No going back. After the Crossroads, companies have two widely divergent paths, with significant momentum (both positive and negative) that is extremely difficult to reverse.
The Crossroads Model — Ionization, Spark, Enrichment and the Crossroads — has played out in a dozen-plus major industries, and we believe it will play out in many others in the coming years. . For example, upon Amazon’s IPO in 1997 — in spite of the lofty valuation that the consumer e-commerce pioneer achieved amid the Internet bubble and its resulting overinflation of value — Borders and Barnes & Noble were collectively eight times the value of the online retail giant, with roughly 50 times the revenue and 100 times the customer base. As Amazon quickly enriched its understanding of Code Halos, consumer e-commerce entered the Crossroads in 2002. By 2005, Amazon was worth twice as much as Borders and Barnes & Noble combined, and had equaled both retailers’ customer count (in similar markets such as book, movie and music retailing) and associated revenues. Just five years later, Amazon was worth 100 times more than Borders and Barnes & Noble combined, and had driven Borders to bankruptcy. Barnes & Nobles’ struggles, meanwhile, recently deepened amid the sudden resignation of its CEO (who championed its underperforming Nook e-book reader) and word that the company is pursuing a radical restructuring.
In the next and final post we will provide some concluding remarks based on client and marketplace feedback
on Code Halos and the Crossroads Model. In this period of generational transformative change more and more leaders concur: They see enormous opportunities for organizations that get Code Halos right (Apple, Google, GE, Disney, etc.); and feel pain for those whose leaders get it wrong (Borders, HMV, Blockbuster, etc.).Organizations that optimize their Code Halos across all dimensions and permutations will more effectively negotiate the Crossroads divide, heading onward and upward toward market prosperity.
Learn more about Code Halos and the rules for successfully managing the Crossroads at unevenlydistributed.com.