An interview with peter hinssen

Radical innovation for the day after tomorrow

Peter Hinssen is already addressing what he calls 'the day after tomorrow', the apparently distant and radically different future which is nevertheless approaching faster than we think. He helps his audience get to grips with that uncertain future. As a contractor, he set up nexxworks that stimulates clients’ ability to embark on 'radical innovation'. As a tutor at international business schools and a popular speaker, he inspires people worldwide to prepare today for the day after tomorrow.

As author of 'The network always wins', he wrote 'a survival guide for anyone who wants to control the future.’ We talked to Peter Hinssen about his vision for radical innovation, and how companies can be successful therein. “When the world around you is changing so fast, flexibility seems to be the most important criterion for success. That’s what companies are looking for."

In this digital age, new forms of working, consuming and communicating are rapidly finding a place in our society. Business models, technologies and ways of working which generate success today may not meet the needs of tomorrow. However, not everyone is convinced of the radical nature of the changes we are encountering. On the one hand, you have the supporters who claim that we are witnessing an unrivalled transformation in which everything is becoming digitised, in which the Internet of Things is emerging and in which robots will soon be doing many of our office jobs. On the other hand, a chorus of sceptics assures us ‘that things won’t get that far’. The changes we are seeing now are more 'fun' than 'fundamental'; the transition from horse to car last century had far greater consequences than the arrival of self-driving cars will have. The statistics support this sceptical view: the average growth of labour productivity over the past fifty years was far lower than in the previous five decades.

How can we understand these apparently contradictory terms?

"In my opinion, both sides are right. Statisticians can brilliantly demonstrate that the real period of growth stopped in the 1970s and that the hundred years before that were the absolute killer. However, measuring labour productivity does not provide the full perspective. Obviously, there have been few developments in that respect in recent years. But I feel the shift that will occur when employees become redundant will certainly be a radical one. The driving force behind it is the combination of machine learning and artificial intelligence (AI), where a series of breakthroughs make me think 'this could be the big one'. Obviously, there has already been a lot of hype around AI and this was subsequently followed by two 'AI winters'. In the labs of Stanford, Carnegie Mellon, Berkeley, however, you see that AI is really being developed at an incredible pace. The reason for those 'AI winters' was that we didn’t actually have the computing power to make it possible. We’ve known exactly how to do it for sixty years. We had the maths and the models, but we just didn’t have the horsepower."

What do you see in Silicon Valley that makes you think 'this could be the big one'?

"An analogy that I like very much is the history of aviation. Everyone knows that we learned to fly in 1903, on the beach at Kitty Hawk in North Carolina. But that’s not true! It was 160 years before the Wright brothers that Bernoulli's principle was formulated, describing exactly how the airflow over a wing profile can generate lift. But for 160 years, that was pure maths, a theory. The Wright brothers were the first to stick a 12 horsepower engine on a wing which was light and strong enough to generate the first lift. I think that we’re at the same point with AI and machine learning: we’ve known how to do it ever since 1956, but it remained a theory because we never had the required calculation power. Now we see one milestone after another being achieved. This year, for example, the best Go player in the world was beaten by AlphaGo, a self-learning algorithm by Google subsidiary DeepMind. To put this into perspective: AlphaGo is a general purpose AI system, so not specifically built to play Go well. AlphaGo is the equivalent of the Wright brothers’ 12 horsepower aircraft engine. We visited Pieter Abbeel, a Belgian who runs the robotics lab in Berkeley, and he claims that AlphaGo has a slightly more powerful combination of neurones and synapses than the brain of a field mouse. If you want to use the computing power equivalent of the combination of neurones and synapses in the human brain, go to Amazon Web Services and hire it for 5,000 dollars an hour. So it doesn’t yet make any sense to replace someone working in accounting, and who actually does algorithmic work, with a computer. But those costs are falling fast. Abbeel can calculate when an algorithm will be able to do it more cheaply and thus theoretically make an accountant redundant."

Things may be going faster than many people think.

"Absolutely. I really think that things are accelerating. At the end of October 2016, a self-driving truck delivered the first load of Budweiser beer, nearly 200 kilometres away. If you think about it, it won’t take long before insurance companies realise that putting a person behind the steering wheel is probably a lot riskier than letting an algorithm do it. And then what will happen to all those truck drivers? We’ll see a massive redistribution of labour which could have really significant socio-economic consequences. I’m convinced that this is on its way. I’m a real techno-optimist, but that social shift is worrying; we will have to find a response. Can we as a country, as a region, as a business or as an individual keep pace with developments? Belgium is now in shock after the reorganisation at ING [in October 2016 the bank announced that it would be shedding 7,000 jobs, half of which are in Belgium. - ed.], but after ING another three banks have announced major reorganisations in Belgium. These are partly the shock waves resulting from the banking crisis, but technological development and digitisation play a major role. The fact that a bank wishes to grow with a third fewer staff indicates that something is really changing. And this is just the start. This isn’t about a minor adjustment; this is about how banks can stay relevant."

How should businesses respond to these shifts?

"In the last century, we had the transition in which companies became more important than countries. I’d say that ExxonMobile is more important or more powerful than Belgium, for example. Now we’re in the transitional period during which power is shifting from companies to networks. I’m convinced that in this century, networks will become the dominant paradigm. The new disruptive players, for example WhatsApp, Uber or Airbnb, are network players: they build a platform, roll out their technology worldwide and act as the hub in a network. The big difference from ten, twenty years ago is that power was then related to size. Now the reverse is true. In my book [The network always wins – see box], I say that if the outside world becomes a network, companies will have to organise themselves internally as a network too. When the world around you is changing so fast, flexibility may be the main criterion for success. That’s what businesses are looking for. New network players do that particularly well, they are actually based on the network idea. But, by its very nature, a traditional company with a hierarchical structure and divisions will have to consider totally new organisational forms. That’s a huge challenge for them. Many companies don’t have the resources, the knowledge or the people required."

You visit many companies. To what extent do they recognise your story and are they already taking action?

"I’m noticing a change at the top of companies. Companies are concerned that they can’t deal with radical changes or shocks. There’s no panic, but there is an awareness and sense of urgency, much more than a few years ago. A number of companies are trying to respond: they are freeing up people to think about new models, concepts, technology, ways to stay relevant. A good example is Johnson & Johnson, the biggest manufacturer of health products in the world. Their head office is in New Jersey. In San Diego, a five hour flight and three time zones away from head office, there is a group of 300 people who are not dealing with today or tomorrow, but with the day after tomorrow. A brilliant idea, but that distance also creates a real risk that the group will come up with ideas which have no impact on the mother ship. The past is filled with companies which have discovered the future in their lab but never managed to do anything with it. Take Xerox, for example. It invented most of what we now use in our smartphones or tablets, but never commercialised it. Finally, Apple took all the credit and created the most valuable company in the world."

With this example, are you saying that companies need to recognise that the ideas for staying relevant for the day after tomorrow probably won’t come from their existing organisation?

"There are many methods to do that. You see businesses establishing start-ups, co-creation with clients, or accelerators and incubators. Deutsche Telekom, for example, has a wonderful concept in Berlin that they call hub:raum. hub:raum is not an incubator like many others, but it selects start-ups which can really add value for Deutsche Telekom. For start-ups, that’s fantastic. They not only get a base and capital, they are also allowed to work on the infrastructure of Deutsche Telekom. So they can immediately test their ideas and if they work, they also gain access to the client network of Deutsche Telekom. That symbiosis between a big, inflexible, traditional company like Deutsche Telekom wanting to use the power and the energy of the start-up community creates wonderful dynamics. This is just one example, but there may be ten different methods for doing this and every company must put its own stamp on it."

These are all forms of networks, cooperation between start-ups, parent companies, clients and other partners. What role do IP rights play in this approach to open innovation?

"That’s a very difficult issue. You see branches of innovation, for example mobile telecommunications, where IP is very important and where big companies can build up huge portfolios of IP rights, just to defend themselves. On the other hand, you see new players who say that it’s about speed and market share. If they develop something revolutionary, particularly in the field of software where IP is always very difficult, for these players it’s a question of 'winner takes all'. Look at Airbnb, Netflix or Uber: who are the numbers 2 and 3 in those markets? I wouldn’t know. Such players have no time to get involved in IP. They don’t safeguard their position with IP rights, but just by wanting to be undefeatable. Google is a good example. Google earns 70 billion dollars a year with its search engine, and the algorithm behind it is in the public domain. In principle, everyone should be able to implement it. Google’s best kept secret is how they organise their infrastructure and their data centres so that they can operate on a hyperscale. Look at WhatsApp, the most used messaging app in the world. It has no protection; it’s about scale. That’s how the new players reason."

With the emergence of these new players, do you also foresee disruption in the world of IP?

"You can question the complexity which we’ve built in around IP. Look at the incredible difficulties and delays you sometimes come across to get something done. There’s huge potential here to rediscover that technologically. Think about the blockchain concept which offers a totally new way to organise trust, agreements and contracts, not via an independent third party, but in a peer-to-peer network. When we talk about a blockchain, many people think about bitcoins or other virtual currencies, but it’s much broader. I recently spoke at the 125th anniversary of the Royal Federation of Belgian Lawyers. We go to a lawyer to make a will because we trust that he will execute the testament as agreed. But these days, I can also make a 'smart contract' which resides in a blockchain. Such a will consists totally of logics, code, software: IF 'Peter Hinssen deceased' THEN etc. And if the government puts a tick against 'Peter Hinssen deceased', then all the transactions required to execute the will will automatically be performed. Everyone was suddenly quiet in the room. But if you manage rights, agreements about who is the owner of what or who is entitled to what, the entire legal profession will have to start thinking. That means that organisations which are concerned with these issues not only have to be legal experts, but technology experts too, data scientists, blockchain specialists."

Do you know any parties who are already addressing this in the world of IP?

"Companies like Ascribe and Blockai let artists and other creative people register the copyrights to their work and they monitor their online use. For example, if my photo is downloaded and used in a presentation, the blockchain is triggered and copyrights are automatically granted and financial transactions settled. So you see, it already exists! If you’re smart and you’re involved with IP, I’d take a good look at these new forms. They could turn out to be very disruptive at some point. The IP world will have to arm itself and reinvent itself. Take the enormous intellectual effort required to search in the multiplicity of patents or to determine whether there is a case of breach. Then imagine that algorithms will soon be better at doing that, and you’ll realise that it will be possible to replace a whole group of patent attorneys with very good algorithms."

CV OF A TECHNO-OPTIMIST

Peter Hinssen (1969) is an entrepreneur, advisor, speaker and opinion leader in the field of technology, digitisation and radical innovations and their consequences for organisations, leadership and society as a whole. He is the founder of five companies, the latest being nexxworks. Peter Hinssen teaches at the London Business School, the MIT Sloan School of Management and the Paul Merage School of Business at UC Irvine. His publications include 'The new normal' (2010) and 'The network always wins' (2014) and he is currently working on his new book 'The Day after Tomorrow'. Every year, Peter gives around 125 lectures at big, open events like MIT Startup Exchange and for Gartner, as well as at smaller, closed events, for corporate personnel or management, for example. His presentation 'The Tiger & The Rock' for TEDxBrussels was viewed over 31,000 times on YouTube. Peter Hinssen is a member of 'Digital Minds for Belgium', an initiative of the Belgian Minister for Digital Agenda, Alexander de Croo.

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