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Business leaders should use both eyes to stay competitive
By Kim Jae-kyoung
SINGAPORE ― The Fourth Industrial Revolution triggered by technology disruptions is taking shape.
This quiet but worldwide transformation is expected to bring much bigger changes in the coming decade than what we have seen over the last 100 years because the digital revolution will break all trends by blurring the lines between industries.
Not in the distant future, new technologies, such as the Internet of Things (IoT), robotics, artificial intelligence (AI) and 3-D printing, will significantly change the way we work, the way we do banking, the way we shop and the way we socialize.
The biggest difference of the ongoing revolution is the pace of new innovation and speed of market adaptation.
"The speed of current breakthroughs has no historical precedent," said Klaus Schwab, founder and executive chairman of the World Economic Forum (WEF), in his contribution to Foreign Affairs.
"When compared with previous industrial revolutions, the fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country."
In a paper titled "No Ordinary Disruption," McKinsey Global Institute (MGI) stressed the importance of becoming agile to survive in the new world of business created by smart technologies.
"From the printing press to the steam engine and the Internet, technology has always been a powerful force for change, disrupting the way we do things and creating new economic value," it said.
"The difference today is the sheer ubiquity of technology in our lives, the pace of new innovation, and the scale of adoption."
According to the business and economics research arm of McKinsey, it took more than 50 years for half the homes in the United States to install a telephone, while in a little more than five years, the same percentage acquired smart phones.
It took radio 38 years to draw an audience of 50 million people, and Facebook did so in 12 months and Twitter in nine. WeChat, the mobile text and voice messaging communication service developed by China's Tencent, added 400 million users in two years.
The MGI forecast that two to three billion more people could go online in the coming decade alone.
Faster technology breakthroughs and accelerating adoption of new technologies are suggesting that if you don't move quickly enough to adapt to change in the environment, you will get left behind.
In other words, if you miss a market wave and fail to reset your business, you won't be able to stay on top ― if you try to stick to current strengths, it can turn into a key weakness.
Sony is a case in point.
The Japanese electronics giant used to be a leader in the global technology industry but it has become a follower over the past years and is now trying to bounce back.
There can be many reasons why Sony has fallen behind but the key reason might be that it failed to adapt to technology disruptions, such as the smartphone wave.
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Creating sense of urgency
In this regard, the Korean government and businesses should feel a sense of urgency and become more agile and externally focused to reset their strategies, keeping a close watch on what their rivals are doing now.
First of all, regulatory reform is most urgent, given that the framework and decision-making processes are based on an old market paradigm and do not well represent the new business ecosystem created by smart technologies.
In the digital-based economy, the regulator has not enough time to thoroughly review every issue and develop necessary measures and plans because things are changing too fast.
At the same time, all entry barriers need to be removed because such obstacles are preventing companies from starting innovative businesses, which will block the creation of a new business ecosystem.
At a recent conference on the Fourth Industrial Revolution at the National Assembly in Seoul, Schwab said that Korea needs to create an environment where not only large players but also small ones can flourish.
He pointed out that the country needs small global champions in more areas to prepare for changes caused by the revolution, noting that Germany has many small hidden champions as well as big companies.
The German economist stressed that the government and National Assembly should work together to develop laws and regulations in a timely manner because the new revolution is blurring the line between industries and rapidly changing the landscape.
Korean firms on their side should fully understand the implications and impacts of the revolutionary changes and be ready to adapt to a new environment.
Diaan-Yi Lin, a senior partner at McKinsey & Company's Singapore Office, recommended three strategies to become a winner in an environment disrupted by technologies.
First, she called for business leaders to use both eyes ― one eye for telescopic and the other for microscopic.
"Telescopic is very externally focused always paying attention to what's going on in the world out there, the macro environment," she said.
"The other eye is microscopic, very focused on very specific areas they must do well. Each of business models is specific and different," she added. "I need to know what products in which markets and which segments and how are we going to win there."
Second, she said that leaders need to be more specific about innovation
"They (today's businesses) are not randomly innovating but very focused on innovating in their business models," she said.
Finally, the consultant said that business leaders should make efforts to become a role model.
"Leaders are not just talking but they are working to talk," she said. "This links not just to people elements but also to business models to keep abreast of what's going on."
