LAS VEGAS — A century ago, Henry Ford transformed America with his automobile production line in Michigan. Today, Professor C.K. Prahalad, Distinguished Professor at the University of Michigan’s Ross School of Business, delivered a keynote at the Interop trade show detailing a very different world than the one Henry Ford knew.
Prahalad used the Interop platform as a vehicle to pitch ideas from his new management book “The New Age of Innovation,” in which he declares a new formula for business value and competitiveness.
“The cost of technology is not going to be a limiting factor to deploy globally,” Prahalad told the capacity keynote crowd. “What will be limiting is our ability to understand what to do with technology.”
Prahalad argued that connectivity, convergence, digitization and social networks are the drivers toward using modern technology. He added that the balance of power for innovation is now shifting from the enterprise to consumers.
Fundamentally, though, Prahalad noted that what is enabling business innovation is IT, and that IT matters more than we thought.
Which lead to the core thesis of Prahalad’s work on value creation: N=1 and R=G.
N is the individual and the need for personalized experiences, which is where Prahalad believes innovations need to be focused. The R stands for resources, which pull from G, which is the global and geographical ecosystem.
“The firm doesn’t have to have the resources, but it must have capacity to access the resources,” Prahalad said.
He added that Google may have 100 million consumers, but the company realized you have to treat each user as unique and each one will want a cocreated experience — and that is what creates value.
“This is a huge shift from the Model T and the undifferentiated consumer,” Prahalad commented. “Where you can have any car you want as long as its black. It’s the transformation from a product firm centric view.”
“Can any of this be done without IT?” Prahalad asked rhetorically.
[cob:Special_Report]The firm used to be the center of attention and analysis with an internally focused view. Prahalad argued that business is now moving to a consumer-driven system where it’s a nodal network and not a sequential supply chain such as Henry Ford’s Model T production line.
In the new house of innovation, which is a metaphor for the modern business environment used by Prahalad, the basement of the house is the technical architecture of the firm.
The roof is the social architecture, the values, skills and attitudes of the firm. The glue that holds it together is the need for flexible and resilience business processes and focused analytics.
“IT does matter,” Prahalad said,” if you want to lead, and that is the opportunity you have.”