Lessons from the Front Lines of Disruptive Innovation

Tech and Creative Labs (TCLABZ) was born out of the disruptive innovation realization that insight about this energy market volatility could be extracted from the online dynamic interaction of people trying to figure out what is going on, what might happen next, and what if I do “X” instead of “Y”?

We believe disruptive innovation technologies help us see new opportunities among the volatility and risk in the world around us.  By helping us play better defense in our volatile world, disruptive innovation technology can deliver performance in the near term when we need it most.  But extracting the strategic benefits of change long term empowers us to use these same technologies to play offense to project our business into adjacent markets at the right time, to take market share from traditional energy market consulting leaders, and partner to offer the right product features and functionality at the right time and the right price to adapt to changing needs ahead of the competition.

Disruptive innovation technology is closing the gap between strategy and performance results.  It is leveraging fundamental analysis of energy supply and demand to forecast prices but then using the results of that analysis with advanced analytics tools to enable artificial market simulation across scenarios to project the analysis forward and drill it down into the details of operations and execution with the full benefits of IT/OT convergence.

Energy market transformation is happening now

The biggest challenge for energy analytics software product strategy is not building it but conceptualizing what to build. The energy challenges facing China are vastly different than those in California or Missouri and so are the economics, market rules, and customer expectations.  One size rarely fits all, but best practice, advanced technology application, and the expertise and tools to deploy them is what brings customers.  Retaining those customers and expanding wallet share of their services spend only happens when the solutions deliver high quality results, consistently, and competitively.

Large organizations are often a confederation of silos loosely organized around a common strategy.  After a while the culture of the organization drives it more than its strategic imperatives.  Internal competition among business units is as fierce as with competitors.

Collaboration technology is leveling the playing field enabling smaller firms transform themselves from ‘go it alone’ silos into horizontal collaborators working together with other smart, fast, nimble firms using the same data, same tools, and access to the same expertise.  Ecosystems grow from the interaction of community of users finding partners to fill gaps in their solution and those who find a sweet spot in the market and quickly assemble a team to produce the revenue and EBITDA to drive the strategy forward.  Change is often swift and disruptive in today’s global competitive markets.

 

The challenge is turning business strategy into action across global markets not by just licensing tools but by creating a continuously improving community of users that harness data, applications and expertise to deliver standardized best practice solutions to serve business needs around the world.  Using those standard best practice products relentlessly thousands of times each year will perfect them and make them better.  Packaging and offering those solutions and value-added services across a growing community ecosystem for consulting, operations and technology partners and customers completes the circle to scalable growth from recurring revenue sources.

Strategies for the Disruptive Innovation Success

  • Recurring revenue improves the quality of earnings and thus overall business valuation.  Unlike billable hours that must be re-earned each month, recurring revenue is a predictable revenue stream from the advanced sale of a data or software license, advisory fees for access to standard analytics products sold on annual contracts, or multi-year outsourced service contracts.  Because the revenue is contracted to recur each month without the sales expense and uncertainty of billable hours projects, recurring revenue improves the quality of earning and overall business valuation.
  • Building a community of users and leveraging their collective strength improves all the products. Being part of a team is important to every organizations success.  We’re also learning that being part of a community team enables us to more effectively and efficiently stay on top of changing market conditions, catch trends at an earlier stage and benefit from the wisdom of the crowd in reacting to key issues. The power of business collaboration sites like Linked In have demonstrated there is more to gain from community interaction than there is to a lot you can miss if you stand outside.
  • Recurring Revenue provides revenue stability.  For many software companies, software licenses are the business norm.  But often those products are dependent upon one or a few skilled users at the client firm.  Lose the model runner and you lose the software license. Recurring revenue trusted adviser contracts are annual or multi-year deals just like software licenses but they offer more predictability and less risk to clients by being part of an ecosystem that can provide peaking needs when business is good and back-fill when a key employee leaves or retires.  The recurring revenue they produce still smooths the peaks and valleys and offers stability for the business in recessions or between big billable hour projects but it offers more upside for the firm and its clients.
  • Best practice in analytics techniques and scenario analysis are best done in community.  Whether it is stranger teams collaborating in global scenario building projects or data analysts assessing implications of changes in reporting patterns for critical information every firm benefits from adopting best practice.
  • Recurring revenue products monetize R&D investment that otherwise would be overhead.  By creating a market for research and development outputs, recurring revenue products self fund or pre-fund R&D and free working capital for major investments turning overhead into a profit center.
  • Crowdsourced predictive analytics tools are essential in today’s global business environment.  Examining web trends from ad words or search engines to assess patterns is a growing part of scanning the environment in every strategy analysis.  You just can’t do that in isolation nearly as well as you can by working with online firms that use crowdsourcing to help gather business intelligence and filter it .
  • Recurring revenue products have higher margins and improve EBITDA.  Because recurring revenue products are ‘produced once, used often and sold many times’ they tend to have higher margins on par with data and software products.  Standardized work scopes and methods allow products to be produced with lower cost, junior staff under supervision to improve EBITDA and speed training.
  • Creating a market for talent and expertise from the knowledge of Baby Boomers.  Every day 10,000 baby boomers retire.  They are taking with them critical information, knowledge and insight the world still needs.  TCLABZ believes the markets will crave access to this Boomer Expertise and the Boomers will seem opportunity to extend their work lives on their terms, in their time as they wish through participation in markets for expertise that serve both business and boomers well.
  • Recurring revenue products improve consulting productivity and quality.  By providing a high quality starting point for repeatable consulting services, recurring revenue products let consultants start work on billable hour tasks faster than competitors, improve productivity by using lower cost junior staff for standardized simulation analysis and improve the quality and consistent of consulting work by leveraging best practices.

Align Your Business for Growth

Applying a recurring revenue strategy to realize organic growth potential is the first essential step in creating a virtuous circle that aligns your business interests with those of your customers. The internal business results from such a strategy drive improvements in EBITDA and performance by:

  • Aligning units around a common growth strategy, common, modular product components;
  • Hone best practices with customer engagement to align and customer interests,
  • Leverage core competencies and capabilities to create recurring revenue streams;
  • Reduces lead time for engagement to start work using speed to competitive advantage;
  • Shifts expertise to customer facing roles focused on business solutions and enables use of lower cost junior staff to build product modules and maintain them;
  • Repeated use of product modules optimizes performance and integration of information, technology, and services into more complete solutions to address customer needs.

Recurring revenue strategies value the firm’s core competencies by monetizing them, using them relentless inside to improve performance results and EBITDA, and demonstrating powerfully to clients that they made a logical choice in selecting your firm as their trusted adviser.

Making sense of uncertainty and its strategic implications for your business in today’s economy requires more than data and analytics skills to proactively assess opportunities and risk.  Predictive technology is helping us find clues about changes taking place from the patterns of interactions across the markets.

Making sense of these patterns and using them to extract insight, assess options, and chart business plans across alternative, expected business environments combines the best of scenario analysis with the predictive analysis of data trends to extract insight—for your business!