Surviving the era of drastic change with Paranoid Thinking|Future-Building Mindset vol.5

“Sooner or later, there will be a fundamental change in the environment surrounding your business,” said Andy Grove—a Hungarian businessman, founding member, and former CEO of Intel Corporation—in his book Only the Paranoid Survive [1]. No business, no matter how successful, lasts forever. Paranoia means having a pathological worry. This is particularly true in an era of rapid technological evolution and poor visibility into the future, as is the case today.


Changes in the market caused by the coronavirus crisis
The key to keeping up with changes in the market

Changes in the market caused by the coronavirus crisis

One year has passed since the first emergency declaration issued in April 2020, but the COVID-19 outbreak is not slowing down, and variant viruses are spreading. The impact of the coronavirus crisis has restricted people’s travel and has sharply reduced the use of airplanes. The introduction of remote work is advancing, and commuting by train is decreasing. However, what is increasing? Communication traffic is increasing instead of road traffic; online meetings instead of face-to-face meetings; buying online instead of going shopping; and streaming videos online instead of going to movie theaters. Companies that offer online services such as Zoom, Google, Amazon, and Netflix are performing well. It can be said that the reduced revenues of airlines and railway companies have been converted into revenues for these companies. Although unaware of it during normal times, they had always been indirect rivals. Competition is not limited to companies in the same industry.

The important issue is to determine the essential changes that are likely to continue even after the coronavirus crisis settles down. We will be routinely adopting the convenient online features we have experienced to streamline our operations. Consequently, there will be changes in the way offices are designed—and shared—and in the needs of the housing environment. There will also be a need for a variety of mechanisms to balance remote and office work. All kinds of industries are developing services that combine the real and online worlds. Your work may also be affected. Before being swallowed by this tidal wave, we should rather turn to the side that creates the wave.
Changes are also occurring in people’s tastes. There is a growing awareness of the need to be health-conscious when choosing products and doing what is good for the body. Companies are being forced to rethink their strategies to prepare for a prolonged coexistence with COVID-19, but also to prepare for the time that will follow. The changing market provides an opportunity for new players to make a breakthrough, capitalizing on this time to start a new business or start-up.

The key to keeping up with changes in the market

Even companies that have made great strides in capturing changes in the market often start out quietly. Airbnb, a private accommodation service, was founded in 2008, and Uber, a ride-sharing company, was founded in 2009—both during the global economic downturn due to the Lehman shock. No one thought that these companies would threaten the hotel and taxi industries within 10 years. With the ongoing development of the internet infrastructure, the spread of smartphones, and usability improvements, sharing services have proliferated. Initially, they attracted young people, but were soon supported by the general public; they have now grown into a large market.

Since the beginning of 2021, the stock price of Tesla, an EV company, has been strong, with a market capitalization rising to between 70 and 80 trillion yen. It was also in 2008 that Elon Musk became the CEO of Tesla. At that time, when EVs faced many technical challenges, it was difficult to predict the current situation. Since then, climate change and CO2 emissions have become global issues, with countries shifting away from gasoline cars to EVs. Social needs have increased dramatically, and the software-first design that Tesla is championing is truly a requirement for car companies.

Currently, seeds of novel innovations are quietly sprouting throughout the world. So, we must consider what we should focus our attention on to be responsive to novel trends.

・Questioning everything
If something has been around for 10 or 20 years, it is doubtful that it will continue to exist in the future. Are industry norms and business practices still necessary in the future? Looking around, there will be many things that appear questionable and can be fundamentally changed through the use of the internet, digitization, and the application of AI. DX is currently well underway in every field. Conversely, lack of innovation in certain areas should be justified. In some contexts, there are regulations in place, while in others there is an excessive accumulated experience that hinders rapid change. A completely different approach may, however, be possible. If we examine all the preconditions of the task and ponder it from scratch, an ideal solution may arise.

・Not ruling out possibilities
It is more prudent to accept even the most difficult and challenging things that at first seem impossible. If the needs of society are high, there is a strong chance that breakthroughs will occur. Many things that seemed impossible 10 or 20 years ago are now being realized. Innovations such as self-driving cars, reusable rockets, easy genome editing, and cultured meat burgers will advance concurrently as momentum increases. Moreover, complex innovations are being attempted in various fields, including quantum computers, innovative battery storage, and neural connections in the brain. If these technologies were to be put to practical use, what are the possibilities for new businesses? We would like to ponder the future.

・Avoiding narrow thinking
The essential crisis of a company is when its raison d’etre is endangered, or when common sense is fundamentally overturned. Rather than coming from within the same industry or immediate competitors, such changes arise from unexpected quarters. The change in movement precipitated by COVID-19, as mentioned earlier, is one example. What started as a minor change quickly became a large wave. It is important to identify the factors driving this wave. It could be the spread of smartphones, the increase in communication speeds (5G), cashless payments, or the performance of cameras. There are always relevant factors that make a product or service possible. Previously, we could predict the evolution of semiconductor (CPU) performance based on Moore’s Law. Currently, we need to focus on the evolution of a wide range of technologies. Moreover, we should keep our eyes open for geopolitical and infectious disease risks, among numerous others.
Considered over 10 years, the participants in the market also change. In particular, Generation Z, born after the mid-1990s, are digital and smartphone natives. This generation will become the center of consumption in the global market. Start-ups operate at the forefront of these changes, and to conduct business in such an environment, it will be essential for large companies to act like start-ups.

[1] The original text is “sooner or later, something fundamental in your business world will change.”
Only the Paranoid Survive by Andrew S. Grove (1936-2016)
Only the Paranoid Survive by Andrew S. Grove, Nikkei BP, Inc. (2017)

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[Tomihisa Kamada: President of TomyK / Co-founder of ACCESS Corporation / Entrepreneur / Investor].
PhD. in Information Science from the Graduate School of Science at the University of Tokyo. Doctor of Science. Founded ACCESS, a software venture company, while still a student. In 2001, ACCESS was listed on the Tokyo Stock Exchange’s Mothers section (currently within the First Section) and expanded its business globally. In 2011, Kamada retired from the company and founded TomyK, a firm providing support to startups, and is currently launching a number of technology startups in the areas of robotics, AI, human augmentation, space, genomics, and medicine. Kamada is the author of the book “Technology Startups Create the Future: Aiming to Become a Tech Entrepreneur” (University of Tokyo Press), which explicates the entrepreneurial mindset.