Tuesday, April 26, 2011

The future that hasn't happened yet

Predicting the future is hard because it hasn’t happened yet. — Attributed to Yogi Berra
For the third and perhaps final time, my friend (co-author, consultant and startup CEO) Michael Mace came Monday SJSU to speak to my honors undergraduate students.

As in the previous visit, the subject was “knowing the unknowable.” The idea of the talk was to prepare these management students for careers at Silicon Valley tech companies.

Mike drew on his experience at Palm (chief competitive officer, VP of strategic marketing, VP of product planning), SGI (director of strategic marketing) and Apple (director of platform marketing, director of competitive analysis).

Predictions Gone Wrong

Competing for the FutureHe recounted seven predictions from the best-selling business 1994 book Competing for the Future by Gary Hamel and (the late) CK Prahalad:
  1. real-time oral translation
  2. urban undergraduate distribution
  3. miniature robots that can unclog arteries
  4. satellite phones anywhere on earth
  5. machine capable of reeling emotion
  6. virtual meetings room replacing air travel
  7. digital highway that bring torrents of information into the home
Only the last two have happened to any degree, with virtual meetings still a niche. Overall, he scores it as 1.5/7 — a .214 batting average "would get you sent to the minor leagues."

The problem is that "no business can bet on seven on those things"; if you bet on any of these, "chances are very likely that you'd lose your shirt". Exhibit A would the Motorola-backed Iridium satellite phone, that lost $2.6 billion in what Wired called the “Edsel of the Sky.”

Why They Go Wrong
Because there are so many examples of group think — what he calls the “flying car problem” — Mace advised student to bet against the consensus.

He listed a typology of reasons why things could go wrong:
  • completely impossible
  • economically impractical — you misunderstood the market
  • competitive displacement — better alternatives (i.e. substitutes) such as the cellphone as a substitute for sat phones.
  • no champion: the existence of tablets before the iPad. Could be great business, but nobody does the product right.
  • possible but not practical yet: largest group of failed predictions (For example, for years he’s been hearing that fuel cells will be in cellphones in 18-24 months).
One problem with faulty predictions is trying to figure how long something will take. Mace advises: "If it's not working in an engineering prototype, you don't know when it’s going to ship”; or, to quote futurist Paul Saffo: "Never mistake a clear view for a short distance.”

In his views, there are two types of companies:
  • visionary, who focus on what the future should be, led by people like Steve Jobs, Jeff Hawkins. “They are completely right up until the point that they’re wrong. … These are people who can march everyone off a cliff.”
  • reactive react to what the future will be. Good at responding to incremental change, but prone to groupthink.
Competitive Analysis: Doing it RIght

Instead, he recommends that firms map and shape the future: "The fundamental thing about the future is that it hasn't happened yet".

He described the process he used at Apple and Palm; he argued that Palm proved prescient at predicting the future in 2001-2002 but lost resources to act upon it. (His approach overlaps what b-schools sometimes teach for scenario planning).

In Mace’s view, firms can create a roadmap of the future by integrating three different functions:
  • market research: they identify destinations on the map, but need to overcome their narrow view of merely being reactive to external queries;
  • advanced technology: they find the roads. If such functions exist, they tend to be in the CTO office and focus on “science experiments” rather than market reality.
  • competitive analysis: where the competition will go and respond. At many companies, if this function is left it’s just a few interns without the experience to analyze the data.
Mace said it’s the responsibility of management both to force these three groups to work together, think about the implications and get decision makers to listen their conclusions.

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