Dear Students it's a pleasure to have you back for the second session.

We're looking at the innovation shift and the innovation shift is basically the transition
into the innovation age.
We're entering a new reality that has new rules and trends and if we want to prosper in
this new reality

then we better understand what's really going on.

So the basic point is that we are experiencing a paradigm shift paradigm shift is a term
coined by the philosopher scientist called Thomas Kuhn and it basically represents a
fundamental reorganization of the rules of reality.

 The first real paradigm shift occurred when mankind embraced the power of the
machine instead of having people working the fields we had tractors, instead of
people hands spinning our clothes we had industrial machines to make the
clothes and all this created a whole new reality “the industrial world” and then the
industrial age was replaced by the global age in which countries were
industrialized.
 But now we're tapping into the power of global markets. And so the global age
was really took off after World War 2 was about building global supply chains and
tapping into the resources of the entire planet.
 And now we're entering a new age again the innovation age powered by
information technology which is essentially about using information to
individualize innovation and that's going to be really important because it's about
individuals the offerings that you're giving to people by using advanced
technology.

So let's have a think about what are the key trends that we're experiencing in this new
reality. There are five key trends

 The people have new desires and seek new solutions.

 Those companies that can grasp these new opportunities and serve these new
customers will be successful as many traditional incumbents are ignoring these
new trends and therefore they are declining.
 The first key megatrend is new generation preferences specifically Gen Y are the
key driving force of this. They focused on individualized offerings.

So basically what this means is that there's a new kind of consumer in the world
who wants different things and that means that they're going to make different
choices.

For example traditionally consumers when they went abroad stayed at a hotel
because that's obviously what you do now with AirBNB, People stay with each
other in their own homes. They open up the house to random strangers which is
crazy and invite them in and they can monetize that.
 You can monetize this spare room. Now this never would have happened 10
years ago with the traditional Gen X and Baby Boomers. This is a Gen Y
phenomena and that has transformed our baby into the most valuable hotel
group in the world. And yet it doesn't own a single hotel.

So the reason why this 30 billion dollar company has emerged out of nowhere in
the last 10 years is because they've tapped into Gen Y in their desire for a new
kind of experience Gen Y don't want to stay in expensive overpriced hotel on the
edge of town. They want to stay with a local person's experience.

For example if you go to Tokyo you wanna stay with a local Japanese person and
really get to be immersed in Japanese reality.

 The second thing that's driving the megatrends of the world is accelerating
technology.

So a key megatrend here is a top technology is getting faster and faster and
faster. Now this might seem obvious but think through the consequences of that.
The consequences of Technology accelerating Is that what was once impossible
becomes probable tomorrow.

In other words it's not far away that things that you once thought were
impossible can actually happen right now.

A great example of this is uber uber. You know before your parents always told
you don't talk to strangers right and don't get in the car with strangers. Definitely
don't do that. What are we doing today.

We take Uber we talk to strangers and we get in the car with strangers. That's
what we're doing. Why do we do this. We do this because it's enabled by this
incredible technology that powers Uber the ability to combine smartphones and
4G networks and Google Maps and all this kind of technology to provide a
compelling solution.

Your personal driver when you want to how you want it. Bill through credit cards
with a trusted a rating system and you can see in a map where everyone is. It's
awesome.

 The third megatrend is the global marketplace. Traditionally companies had

customers in the local area because that's who would come into the shop.The
people who lived in the local area.

Today we have a global marketplace platforms such as Amazon and Alibaba and
many many more mean that anyone can sell anything anywhere to anyone.
You're your customers no longer the person who lives close to your office.

It could literally be anyone on the planet especially with the creation of digital
services. And so what this means is that we are now competing at a global level
but also able to earn customers at a global level.
 So that really changes the way in which we're thinking about who are trying to
serve and who we're competing with.

 The fourth megatrend is what I call geopolitical capital flows and really is split into
two concepts here.

Let's look at capital flows first. Capital flows basically means that there's a lot of
money out there at the moment trying to find a higher return for its investment.

Traditional places are not giving you the return that you wanted to for example
interest rates in the developed world. So there's a lot of money flowing around
the world trying to find returns in the way that they do that is by investing in new
companies.

So the Harvard Business Review causes the age of super abundant capital what it
basically means is that there's a lot of money trying to find new investments.

And so if you're a person with a startup and you have a good idea that means
your chances of success now are much higher maybe 20 years ago. Be much
harder for you to earn investment rest today. It's a lot more straightforward and
with many more startups getting much more funding it means that everyone is
suddenly accelerating the rate of innovation.

Now the geopolitical aspect to this recognizes that there is political influence of
these capital flows. There's a new world order that is emerging the traditional
hegemony of the West especially the USA leading the world is being disrupted by
new giants emerging such as China and India in particular.

So that might lead to the example of something being created like Ali P. Ali pay is
essentially a Chinese payment platform. You can think of it as a visa but it also
combines a social services that Facebook does and also the shopping services
that Amazon does.

So imagine kind of like a Visa slash Facebook slash Amazon has one mega
company. Now this has 400 million users this company that's huge.

And so the Chinese government is using this as a vehicle to increasing Chinese

influence and power in the global economy.

 Now all of these trends interact under a greater megatrend which is called
VOCUA coined by the American military in the 1990s it stands for Volatile
Uncertain Complex and Ambiguous.

1. Volatility represents the fact that extreme changes happen very quickly.

For example Apple went from being bankrupt in the late 1990s to being
the world's largest company. How did it do that. Through the growth of
the iPod iPhone generations so volatile means th e world can change very
quickly.
 2. The world is also very uncertain you never know what's going to happen.
For example today's artificial intelligence revolution is powered by video
and video made its money by providing graphics cards. So by building
what's called a GP to a graphic processing unit they were able to power
many of the successful gaming computers of the world. But it turns out
that a GP view is exactly what you need to power artificial intelligence.

So in video stumbled into the artificial intelligence field and its technology
is being used for example in cars like Tesla to power autonomous driving
but Nvidia never predicted that that's a key point here.It's an uncertain
future. And in video went forward and made the future it wanted to.

3. Speaking of cars it's also a very complex world. It's a sea of hookah and
there's many highly interconnected moving parts. Tesla is not about being
a car company. It's about being something much greater than that.

Tesla yes does build cars but it's also heavily invested through acquisition
of Solar City in solar energy. So with what Tesla's trying to corner is a
transportation and energy market basically you drive an electric car. Your
car is then powered by Tesla solar panels and then you will also rent your
car out to Tesla to drive around Uber like when you're not using it to earn
you extra revenue. So it's a very complex world with many different parts
coming together.

4. And finally a stance for ambiguous or ambiguity means you don't know
what's happening right now. So uncertainty as you don't know what the
future is ambiguity means you don't know what's happening right now
and a great example of that is Bitcoin.

This crypto currency. No one really understands what's going on but if you
look at the valuations people are making a lot of money out of Bitcoin.
There's a lot of really interesting things happening through the Bitcoin
currency and also the block chain phenomena. As a technology.

So what does this all mean. Well this basically means that there's three new rules for
the innovation age.

 The first rule is that you win today by consistently creating better innovations
faster. Not by having more money or customers. I'll say it again you are not going
to be successful today simply because of your scale of operations just because
you're bigger or you have more customers does not mean you're going to win
you're going to win by creating better innovations faster.

A great example of that is Zara the fast fashion retailer that disrupted the global
fashion industry and became one of the world's most valuable companies
through its ability to get clothes from concept into the shop in six weeks where
traditional retailers might take months or years to do that. So by being much
 more innovative and much faster Zara beat the competition and captured large
parts of the market.

 The second thing you need to do. The second rule is that you need to earn your
relevance by serving your customers what they really want. Too many industries
and too many companies rely on being the only provider of choice to the
customer. So for example the taxis when you turn up the airport were like hey you
don't a taxi take the bus you didn't have another choice Uber completely
changed the game. What this means is that the traditional barriers to entry have
fallen and you can no longer rely on the consumer having to choose you.

Today consumers have many choices and you to earn your consumers choice by
offering them a superior innovation.

 Finally number three the way you remain relevant is by ready writing the
megatrends especially the five that I have mentioned to you. You have to
continuously pay attention to where the trends are evolving. We can fall very
quickly. Blackberry for example did a great job of riding the early trend and went
from a one billion dollar valuation to a 20 billion dollar valuation.

But then it fell off a cliff because it failed to realize the transition to the digital
lifestyle that I talked about in session one. And so they went back down again to
one billion dollar valuation. That's quite a ride for seven years. So you always have
to pay attention to the trends to keep up.

So in summary what the session has been about is understanding that we need to stop
ignoring the key megatrends that are driving the innovation age.

And if you start embracing them you can create relevant innovations that will drive
growth and success.

Welcome to the end of session learners.