The Gartner Hype Cycle shows a remarkably consistent pattern. A new technology is first ignored, then begins to show promise and expectations get inflated beyond any realistic assessment of value. That leads to disillusionment and the technology is almost forgotten until, some years later, it begins to make a true competitive impact.
What makes the Hype Cycle so pervasive is that it is, essentially, a pattern based on our obsession with patterns and stories, which is so universal that there is a whole branch of mathematics devoted to it. Our love of patterns is so great, in fact, that once we notice one we are often unable to disregard it.
The concept isn’t limited to the technologies Gartner follows. At any given time there are a variety of trends and business ideas getting hyped. That’s a problem because an enormous amount of time and energy is wasted when a trend is at maximum hype. Right now there are three major trends you need to watch out for if you don’t want to get caught in the cycle.
1. Robots Taking Our Jobs
Ever since Brynjolfsson and McAfee’s breakout e-book Race Against The Machine, the meme of robots taking our jobs has become a near obsession. From game show playing supercomputers going to medical school to article writing software bots and cheap, collaborative robots in factories, it seems like our limited human abilities are losing the race.
The notion that automation reduces employment is nothing new, of course. It dates back at least as far as the Luddite movement in the 19th century. Yet so far, technology induced unemployment hasn’t come to pass. In fact, although the workforce has doubled since 1970, labor participation rates have risen by more than 10% since then.
Some argue that this time is different, because now machines are replacing cognitive skills as well as physical labor. That is, of course, possible, but so far there’s no indication it’s actually happening. In fact, the US is beginning to experience a labor shortage which is especially severe in manufacturing, where you would expect technology to have its greatest effect.
So, at least for the moment, we don’t have to worry about robots taking our jobs, but the nature of those jobs are changing as social skills begin to trump cognitive abilities and collaboration becomes a competitive advantage.
2. The Platform Economy
Another recent obsession focuses on platform businesses. Firms like Uber and AirBnb have built billion dollar valuations in just a few short years. Business gurus practically swoon at how this new model dominates traditional “pipeline businesses” that are encumbered by old fashioned physical assets.
Look a little closer though and the picture is not nearly as rosy as it seems. Uber has blown through billions and still shows no signs of becoming profitable any time soon. It possibly never will. AirBnB represents less than 1% of the global hospitality industry. Clearly, there is far more money to be made in the other 99%. Hotel occupancy recently hit record highs, although room rate growth has slowed a bit.
Even Amazon is somewhat of a cautionary tale. It’s obviously a well-run company managed by one of the great management geniuses of our time. Still, until recently, it was a poor business earning sub-par margins. Lately, its profit picture has brightened considerably, but mostly due to its cloud computing unit, which looks far more like a pipeline business.
What’s truly important about platforms is that they allow us to access ecosystems of talent, technology and information far more efficiently than we ever could before. Some of that value will accrue to the firms that manage those platforms, but far more will go to everyone else.
3.The Retail Apocalypse
It seems like every time you turn around these days another major retailer is hitting the skids. Toy R Us recently filed for bankruptcy, major chains are closing stores and it’s becoming clear that many storied brands will not survive. It has been estimated that half of American shopping malls will go out of business by 2023.
Many are calling this a retail apocalypse, but look a little closer and it becomes clear that there is more to the story. Amazon has made a big push into physical retail, capped off by its $13.7 billion purchase of Whole Foods. Others, ranging from Bonobos to Warby Parker, also opened physical stores.
So clearly the problem isn’t with retail itself, but the inability for legacy firms to adapt to a new model. What’s really going on is that the function of a physical location has changed from driving transactions, which can happen anywhere these days, to doing all the things that can’t easily be done online, like build relationships, service and upsell.
In some cases, traditional retailers are actually benefiting from the store closings, because commercial landlords have learned to be far more flexible, which allows for more experimentation with new concepts like pop-up shops.
Forget About The Hype And Focus On The Shift
Take a look at these overhyped trends and it becomes clear that our perceptions of them are heavily influenced by availability bias. We see robots doing human tasks and not the new jobs that are being created. We see platform businesses like Uber and AirBnB explode overnight and never ask if they are making money. We see retailers close, but don’t notice what’s opening up.
The truth is that value rarely disappears, it just shifts to another place. Knowledge workers become relationship workers. Platforms lower costs for pipelines. Large retail locations with stockrooms give way to “shoppable showrooms” that combine “high touch” experiences with same-day delivery.
So instead of getting consumed by the hype, we need to look for the shift. Managers need to shift their emphasis from individual performance to team performance. Businesses need to focus less on building proprietary value chains and more on widening and deepening connections. Retailers need to ditch outdated metrics like sales per square foot and take the entire retail ecosystem into account.
Today, everybody needs to learn the art of the shift. Disruption is nothing new, but today it happens much faster and the longer we cling to old models, the harder it is to solve new problems and the less likely we are to survive. On the other hand, once we make the shift, the possibilities are endless.