Harnessing Disruption: Going Bi-Modal
August 12, 2016
By now, Verizon would have completed its acquisition of Yahoo for 4.8 billion USD. Many of us remember a time when the Internet was almost synonymous with Yahoo; in fact, a lot of us probably started with @yahoo.com as one of our very first email addresses.
But in July 2016, a titan of the Internet was sold off at a mere fraction of its value, which in 2000 peaked at about 125 billion USD. Of the many articles analysing the fall of Yahoo, one reason stands out: despite being as an innovator of the early Internet, Yahoo was unable to keep up with the times.
How many stories like this have we heard in the last decade alone? Nokia comes to mind. Blackberry, too. Before Facebook, Friendster was where our young people first hung out. And does anyone know what happened to Geocities?
These companies fell to the disruption of what made them successful in the first place.
Disruption. Few words are thrown more loosely.
On one hand, disruption means a radical change to how we operate. But if you run a business, it also means competitors or other forces that threaten you as an incumbent.
The obvious solution to disruption is adaptation.
You evolve or you die.
How Are Businesses Adapting to Disruption?
IBM no longer makes personal computers. Amazon puts emphasis on its Web Services, or cloud computing. HP has split into two divisions to narrow focus on consumer and on enterprise. Even Apple is slowly shifting towards becoming a service business than being a hardware company. Meanwhile, Google restructured into Alphabet to more swiftly and independently respond to disruption.
The problem is that not every company can adapt quickly enough, or even be able to adapt at all.
Disruption simply affects businesses too swiftly. Where changes in business models can take decades, the effects of disruptive technology can happen in just a few years, sometimes even months. That’s akin to an overnight event in business terms.
Furthermore, how do you convince your investors that your “safe” and currently-profitable business model has to be altered in favor of an untried approach. And all for the fuzzy benefit of “keeping relevant for our customers in the future”?
A case in point was when Facebook bought Oculus VR in 2014, practical virtual reality seemed at least a decade away. In hindsight, it was a strategic bet in the future of social networking, which Facebook currently dominates. Just two years after the seemingly odd purchase, Samsung now offers VR gear for its flagship mobile phone, and other tech companies have unveiled their own version of virtual reality equipment. Hundreds of VR-ready games have suddenly sprouted like mushrooms. Today, people take for granted that games are VR-ready, not the novelty they were just few years ago.
Pointwest, the company I co-founded in 2003, has long been bombarded by disruptive forces. We are, after all, in the IT and Business Process Management business. Few industries are as exposed to disruption as the one we are in. Yet in the 13 years we have existed, Pointwest has not only survived disruption but, dare I say it, thrived in circumstances where bigger companies have fallen.
How Pointwest “Attacks” Disruption
We attribute this resiliency, in large part, to our ability to identify trends and shift towards meeting them with agility, while selectively retaining what made us successful. As an example, many ask why a company with IT as its core DNA has BPM elements. Because we at Pointwest saw early on how deep technology would permeate everything, we established a Healthcare Information Management unit before it became mainstream. The opening of the US healthcare industry to technological advancements via the Affordable Healthcare Act simply vindicated our strategy. We are well-positioned to take advantage of this market that is ripe for disruption.
In 2012, Gartner talked about the “Nexus of Forces,” composed of four elements—Social Media, Mobile, Data Analytics and the Cloud—that would cause great disruption, not only in business models, but also, in how our lives run. Four years later, I don’t have to tell you how real this has become.
Running at Two Speeds
To adapt to the disruption by these forces, Pointwest decided to take what we called the “Bi-Modal” approach. We run at two speeds, recognizing that older business models are not immediately rendered useless, while true growth means taking calculated risks.
In what we call “Mode 1”, we continue to operate in a terrain that we are quite familiar with. Clients’ demand for our expertise in this area continues to be high. It also assures our investors to see steady revenue streams.
Meanwhile, we have begun laying the groundwork for “Mode 2,” where those services and capabilities imperative for the digital economy are quickly being reshaped by the Nexus of Forces. We strengthened our already award-winning mobile division. We secured partnerships with Amazon and Google for cloud services. We expanded our User Experience Design unit into a full service offering.
And in our most daring move, we developed an intensive five-week bootcamp that transformed Math and Statistics graduates into capable Data Science and Analytics professionals. We had an upper 6% placing in a Kaggle competition, touted as the Olympics of Data Science, to prove the viability of our training program. Then, our Data Science and Analytics unit did a challenging social media data analysis of the 2016 Philippine National Elections.
The key in the Bi-Modal approach is to effectively run both the traditional and digital in parallel. You use the tried-and-tested business models to keep you profitable, while slowly building capabilities in the third platform.
The proof, as they say, is in the pudding. Pointwest has remained profitable year-on-year, on the backs of both of our Modes. It’s why the International ICT Awards awarded us a Hall of Fame after being “Best Filipino-owned Company” three years in a row. We garnered other accolades such as the Philippines’ first win in the World Summit Awards for Mobile, and a Silver finish for Innovation in the 2015 ASEAN Business Awards.
In order to adapt to a world being disrupted by the rapid pace of innovation, the general thinking is that you immediately ride the disruption horse and ditch the traditional donkey. To do otherwise is to risk becoming the next Yahoo or Nokia. But that way is not without significant risks, sometimes too drastic that your stakeholders balk at the concept of “forced evolution” just to remain viable.
Pointwest’s Bi-Modal approach keeps selected tried-and-tested methods to mitigate the risks, and costs of change, while embracing growth at a sustainable pace.
By going Bi-Modal, we ground ourselves in the stability of the past while getting ready to launch towards a bright new future.
This message was also shared during the recent Asia Tech Summit 2016, which was presented by Sprout and organized by the Asia CEO Forum.
If you are interested in what we had to say and want to discuss, feel free to reach out to us through the comments. Or you can send us a message through our contact page if you wish to make an inquiry about our services for several industries.