by Mark Raskino | August 4, 2014 | 1 Comment
My son is currently reading “Being Digital” by Nicholas Negroponte. He’s already impressed by how well it predicted the digital disruption of the media and music industries. But that is now a very old story (the book was published in 1995) and it’s a story mostly limited to things that were always inherently information goods. News is data – bits not atoms. A more recent and tangible business history example – the disruption to Kodak and the other old chemical photography kings – has already been analysed to death. Mention it and people’s eyes glaze over. The problem is that old stories of disruption are easily ignored or marginalized. That doesn’t help you get your people alter, thinking and acting.
So If you are trying to understand and explain what the future of digital business disruption might look like for your own industry – where should you look for examples? There are several good ones, but my current top recommendation is that you keep a close eye the tobacco industry. It’s an example that is providing a great deal of learning opportunity as it gets disrupted at astonishing speed.
Here are 7 key learning points so far. Over the next few blog posts, I’ll expand each one.
1) A physical goods industry can be digitally disrupted.
If it can happen to tobacco – it can happen to anything
2) Product digitalization can be hard to believe and easy to deny and ignore.
It’s just an ‘electronic’ cigarette right? So where’s the digital?
3) Digitalization can progress at breakneck speed by sidestepping regulation.
Evading existing regulation, at least for a while, is turning out to be one of the biggest strategic plays in digital business disruptions.
4) Digitalization can kill an existing industry model within a decade.
The growth rate of e-cigarettes is huge; the tobacco cigarette is flat. The forward projection is easily calculated.
5) Disruption can come absolutely anywhere. Adaptability beats prescience.
The e-cigarette arrived suddenly, from China. What matters most is how existing tobacco companies react – not whether they predicted it.
6) Disruption creates great opportunities for incumbents, not just the entrants.
For example, the tobacco companies can use e-cigarettes to reinvent distribution channels, revenue models and customer relationships.
7) Existing old industry players can end up winning if they move smart and learn fast.
Book publishers didn’t learn from the iTunes case, so they got ‘Kindled’. The tobacco industry isn’t making the same mistake.
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by Mark Raskino | July 18, 2014 | 1 Comment
The Internet of Things is a curious name for what happens when objects other than computers, start to become electronically networked. With this capability we might take sensor data from them, to monitor our world and optimise things more effectively. We might be able to control objects remotely from afar. We might might send software updates to objects in order to upgrade their performance or add new functions.
To call this wonderful new world an Internet of Things is entirely accurate. It helps us discriminate a phase of innovation that is genuinely new, from that which has already happened. First we had an internet of connected computers – our PCs, laptops and servers. Then, via technologies like Smartphones, Facebook and Twitter we created an internet of connected people. Now, because of Moore’s law and its continuing miniaturising and cost reducing effects, we can start to embed processing power, memory and connection directly into everyday things. What things? Cars, wind turbines, tennis raquets, lamp posts, trash bins, dresses.. the list of things being connected is in fact endless.
Though the term Internet of Things is accurate, it is rather detached and it omits a key ingredient: a sense of ownership. It makes it sound as if this will all just happen, as a result of some exogenous force. However there is no Fairy of the Silicon Valley, flitting around the world with her magic wand connecting things. It won’t happen unless we make it happen. Technologits have made it possible, but you have to make it happen. Becuase every single thing, in the internet of things – is some company’s product. The CEO of that company must decide when the time is right to start connecting his or her products, then create the capability to do so.
For now, the market has decided it likes the term Internet of Things, so that is what we all be reading about and saying for the next couple of years. However, when you hear those words, make a point to correct them in your mind. It is an internet of products. Doing that, will gently remind you there is an action point pending on your strategy ‘to do’ list. Sooner or later it will need to be an internet of your products too.
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by Mark Raskino | July 17, 2014 | 1 Comment
Some news items from this year, so far:
From movie making to medical devices and from mobile payment systems to cars, Google and Amazon seem to be very comfortably entering multiple industry sectors. This isn’t IT service support like you are use to getting from your favorite old school technology provider. In many cases its potentially the thin end of a very dangerous wedge. What might the thick end look like? Well how about product reinvention, business model change, IP control, core competency substitution, repricing, and distribution platform control.
This is part of a process I have been referring to in my research as the digital ‘remastery’ of industries – where products and services are fundamentally re-engineered for the digital age. The shocking thing is how easy it seems to be for these new outsiders to enter so many sectors and reinvent their products. I now believe that no industry is truly safe from this. So shouldn’t some business leaders be just a little more shocked, embarrassed and reactive?
Imagine I’m a Warren Buffet style long term investor and you are the CEO of a company that claims to “lead its industry”, or aspire to, as so many do. Can you really convince me you are in control of your destiny, if companies like Google or Apple are busy reinventing the future of your service or product? For sure – partnering with them might help you learn and stave off the problems for a while. That’s what Marks and Spencer did, using Amazon as its retail e-commerce platform provider for 7 years. But in the end, your industry is your business. Whatever core is, you must be master of it. That new competency might be what you need to remaster your own industry. The question you should ponder is this: why isn’t it evolving from within your own R&D and innovation capacity – and when will you fix that?
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by Mark Raskino | July 15, 2014 | 2 Comments
Nobody is a digital business laggard yet. True digital business as Gartner sees it, involves blurring the physical and virtual worlds in ways that have only recently started to become possible as a result of mobile, cloud and the internet of things. So why take the risk of being an early mover? The answer is because it will be a long, hard and complex move into a new world, with different core competencies. It’s not just a matter of installing technology You must develop new culture, method and capabilities. These things take time to evolve and instill. They are hard to copy quickly. Its a marathon race, not a sprint.
To understand the risks and costs of being late, you have to look back a decade of more. Examine the companies that could have, or should have acted more aggressively on prior waves of internet enabled change such as e-business and digital marketing. Here you find out what the pain of playing catch-up can look like. Three examples have caught my eye lately. In each case you can’t blame the current executive teams and boards of directors alone. It has taken 10 years or more of relative sloth to leave the companies struggling to catch up.
Marks & Spencer – in its last quarterly results, admitted “our new M&S.com site will take four to six months to settle in and, as a consequence, will have some impact on General Merchandise performance”. They have a new platform to replace a previous 7 year dependency on Amazon’s. As their head of e-commerce said when they decided to end the partnership: “We’ve been renting the car rather than owning it”. Quite. She might also have said – its too much of a strategic risk to be dependent on such a powerful competitor. M&S moved onto Amazon in the first place because the M&S platform before that was under-invested and did not meet the kind of customer promise expected of a firm in their league. From about 1996 to 2004 M&S leadership simply did not take e-commerce seriously enough. They could have, after all – Tesco did.
Lesson: what you do NOW in the early years of (physical) digital business matters more than you know. If you procrastinate, you are setting up deep problems later on. The market experiments, learning and capability development you need to do are not expensive or risky – compared to the long term health effects of inaction
Bed Bath & Beyond has also had to share bad news in its latest quarterly results, with revenues below last years, below analyst expectations and sub par for its sector. Financial analysts have pointed to its relative weakness online as a key factor in its performance. An article on influential consumer financial investor Motley Fool sums it up thus: “its online channel is woefully inadequate according to some analysts, while Restoration Hardware’s online sales, for example, are booming. Despite investments in this channel, there isn’t much notable improvement to be seen.”
Lesson: ignoring your industry peers is a mistake. Maybe all of you ignored the trend at first, but once some of the others get going you must move with the pace setters. That’s because you can’t catch up quickly later just by throwing money at the problem. Its not just a matter of tech investment. Hearts and minds must be won and shifted. Processes and organisation structure must change. New methods and driving metrics must be created and believed in. Ideas like the end of the bricks and mortar ‘space race’ take a long time to seep into the consciousness and actions of all the line managers in a large organisation.
Morrisons sold its Kiddicare business for just £2m, writing off £163m of value in the online baby products business it acquired only 3 years ago. Morrisons now has a tie-in with online only grocery retailer Occado to help provide its e-commerce capability.
Lesson: you can’t catch up by just acquiring your way into new capabilities. Often the acquisitions will be a poor fit or will fall apart in your hands.
These lessons all hark back to the dot com / e-business era. Some management teams back then, didn’t take the industry transformation power of information technology seriously. They under invested, or did so only half heatedly for PR effect (and then often pulled back quietly). We are now facing another great wave of change, and quite probably a bigger one. This time it applies to many more industries, not just the consumer facing ones. This time it impacts the products you make and serve, not just the way you sell them
Today’s digital business strategists must raise examples like these with executive teams and ensure they learn the lessons of e-business history.
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by Mark Raskino | May 8, 2014 | 2 Comments
Last week, I went out and bought a new camera for myself. I’m a frugal kind of guy – this doesn’t happen often. Once a decade really. I knew what I wanted, did my homework and I was very pleased with my purchase. This episode provided strong examples of at least 4 major issues going on in digital business strategy today.
1) The end of the camera shop
I’m old school – I wanted to talk to a camera guy in camera store. For me that’s part of the enjoyable shopping experience. I found one – and the service was great, but of course there aren’t many camera shops anymore – even in London. In 2013 the last major UK chain shut its 137 stores (the brand name was bought from the liquidator and a handful of new stores were opened). The power of e-commerce to replace most of the physical stores in some categories of goods, is most visible in electronics and white goods. Its not all bad news. This year AO.com (appliances online) floated on the stockmarket (“IPOed”) valuing it a £1.3Bn. This is the creative destruction effect of e-commerce, or e-business.
But e-business is not digital business. That’s the confusion. These e-commerce retail disruption effects are not new – they started over 15 years ago. Gartner defines digital business as: The creation of new business designs by blurring the digital and physical worlds. That physical aspect manifests itself in the digitalization of products as they become part of the internet of things.
2) A digital product can be digitalized more
My old camera was a digital camera. So in some ways, my purchase was not a transition from the analogue to the digital product world – that already happened. But my previous camera was an SLR. It had a digital sensor rather than film – but it retained the old analogue method of looking directly through the image lens to frame my shots. That old method was a mirror, allowing my eye to see down the barrel of the lens until the last moment before the shutter opens. The mirror is then mechanically flipped up out of the way – allowing the light to fall on the sensor or film. My new camera replaces that with an entirely digital alternative. The eyepiece contains a tiny, high resolution screen and the image from the sensor is continuously sent to it. I frame my shots just the same as an SLR – but the mirror has gone. Consequently – the whole camera is smaller and considerably lighter – even though it retains all the manual controls and interchangeable lens options you expect from an SLR system.
3) Digital products use smartphones as remote controls
My new camera can connect to an app via WiFi. I can use the app on my phone or tablet. The app controls the camera. I can focus, zoom and shoot remotely from the phone or tablet. I can view images and send them on. The utility of the product is improved – but the camera maker does not have to provide a physical remote control device. The app is a free download to the consumer. More value, same price! This idea is gaining ground in other categories. For example BMW offers an app that can ‘precondition’ your car – you use to it remotely start the aircon or heating, a while before you get in.
4) Digital products cry out for digital services – but, manufacturing companies struggle.
My camera is fantastic. It does lovely computational effects like “HDR“. The app remote control is cool. I have duly registered the camera with the makers website, for my extended warranty – but there ends the relationship and probably, there ends the revenue stream.
Oh they might sell me one more lens, or a spare battery I guess. But through the whole highly enjoyable un-boxing and registering process – not once did the camera maker suggest where I might store my photographs, or what services could be applied to them. Maybe I’ll store the images with Apple, or Dropbox or Flickr - why does the camera maker not seem to care? I like the in camera HDR and I’m hooked – but its not the best possible. The camera’s little processor can never compare to the compute power of the cloud. I want more advanced effects – I’d even pay a small fee to post process some images. How much would I pay? 5 us cents per image certainly; 25 – maybe. I want to show off my new photos and to tell everyone how pleased I am with my new camera – yet the manufacturer provides no place for me to help celebrate and advocate.
Makers of products must learn to create and manage ongoing services that help the customer get value and add value through the usage life of the thing. If they don’t others will. Those others have the opportunity to control the bulk of the customer value experience over the useful life of the product. That gives them more mind-share and in the end they will use that to gain value chain control over the industry.
P.S. We are often more obsessed with the technology, than the value it brings. That value is in information. So the question you want might to ask me – “what camera do you have?” is unimportant. Here’s the answer to the better question – “what kind of pictures can you get?”. The images are information and information is value. They will be around long after the camera model is a forgotten historical footnote.
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by Mark Raskino | April 25, 2014 | 3 Comments
[fixed the broken graphic link!]
We have just about completed our collection of published research from the 2014 survey. Clients can find the various reports full of analysis and actionable advice, via this ‘top view’ report
Here are a few headline data points, to spark your business and technology thinking.
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by Mark Raskino | April 24, 2014 | 1 Comment
Recently I have been developing the keynote for Gartner’s annual “CRM” Summit event in London. I place CRM in quotes because though this event has been running many years - it isn’t actually called that any more. It is called the Gartner Customer Strategies & Technologies Summit. Personally, I like that title because for many people the term CRM connotes only one stage in a longer technological journey that marketing is on. At the event, I’ll be introducing some of Gartner’s thinking about Digital Business and how it applies in the context of customers and marketing. Gartner now defines digital business as:
The creation of new business designs by blurring the digital and physical worlds.
That points to another massive wave of creative change, coming to those who work at the interface between technology and marketing.
I’m old enough to feel nostalgia when I watch Mad Men. When I joined the workforce in the mid 1980s, the marketing leaders I met were raised with the thoughts and ideas of the swaggering big brand advertisers of the 1970s. It was all about TV and bigger was better. Hiring movie directors and spending more than anyone before, was the way to win. Here’s an example. But in those days, the intersection between information technology and marketing, amounted to not much more than a couple of Apple Mac computers, used to review print ad graphics from the agencies.
Then came two massive waves of technological change to marketing. First, in the 1990s came CRM, which emerged because technology advances made it possible to store and analyse all of a customer’s transactions in large databases, drive conversations via direct mailing and call center technology and actively manage aspects like loyalty, customer lifetime value, cross selling and up selling. Second, in the 2000s came digital multi-channel marketing. The explosion of the web and email as interaction mediums, then supplemented by social and mobile – have given marketers a dazzling array of possibilities. There is still a huge amount of new innovation and value to come from those opportunities, but the next major wave is already here and it won’t wait.
The internet of things is upon us. It isn’t the future anymore. These products already exist:
- A capsule coffee machine that automatically sends its status to service engineers.
- A tennis racquet that measures every hit and transmits the data to a tablet app.
- A car with an app that allows you to ‘precondition’ it remotely before you get in.
- A set of bathroom scales that can tweet your weight.
- An electronic cigarette that can detect others vaping the same brand in the vicinity.
- Ski goggles that can show you where you buddies are on the slope.
Most of these things are sold by big brand companies you know, not just experimental start-ups. The richness of interaction and understanding that marketers will gain, from products that report on their state as they are used and consumed in the physical world, will be like nothing we have seen before. Today, Netflix can know precisely when people switch from viewing a program on TV to viewing on Tablet. Your company can know how long it takes between when a web page loads and when people first click on it. But those are things happening in the weightless, virtual information world. Soon, that kind of primary data understanding will come to the world we touch and hold and carry and sit on and kick. Marketers will understand how people live in enormous detail, discover new unmet needs and learn how to serve those needs better than ever before.
Once more, marketing as a discipline will be completely revolutionized by a new wave of information technology – this time from sensor and actuator enabled, wirelessly connected smart physical products. It is going to be quite a ride.
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by Mark Raskino | April 14, 2014 | 3 Comments
Last week we published the Gartner CEO and senior business executive survey. This is an annual global survey of over 400 of the most senior business executives at large companies. The findings are quite rich and detailed. Gartner clients can read the main report here. When I’m asked to net out some of the top findings for this year, I point to three things:
- Growth is a very high priority for CEOs – rising vs costs again year over year, showing the strength of business leader confidence to go out and win new customers and revenue.
- CEO mentions of IT related matters as a business priority, are at the highest level we have seen for over a decade
- But CEO understanding of digital business, is lagging.
CEOs now see technology – especially in the context of the D word: ‘digital’ as an important way to win growth, as economies rise again. CEOs are keen on investing in IT and digital, but we also see a risk that they will direct the investment mostly towards older ideas and a market lagging agenda. By old, I mean things that could have been in an “e-business” strategy circa 2004.
Capabilities like e-commerce and online marketing have now become mainstream and many companies find themselves needing to catch up. They have done a bit of both for years – but only now are they taking those capabilities seriously, as the main way to get the fastest part of business growth. Beyond that, copying the web experience into a coupe of mobile apps to spice things up, isn’t going to take them to the next level.
CEOs should be starting work on the next set of major disruptions too, because technology is accelerating. Some CEOs will scrabble hard to catch up the 8 to 10 year gap they left open, between when the last major tech enabled business idea arrived in their industry and when it really started to bite. However, they might only get 3 to 5 years until the next major shift hits their markets hard - and that clock has already started counting down.
Our survey found that less than a quarter of CEOs appreciate what digital business is really starting to mean – as a world of mobile enabled, smart products emerges to form the internet of things. They must start pursuing that agenda now. If they are still catching up with the old e-business stuff, it’s going to be a hard ride.
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by Mark Raskino | March 27, 2014 | 6 Comments
My conversations with Gartner clients over the last few months have usually centered, one way or another, on the big shift to digital business and how to organize for it. The interactions are usually with C-level business and technology leaders and their senior management reports, in conventional companies that are trying to become more digitally engaged and progressive, quickly.
Often, the inevitably middle aged senior leaders quickly reach for the solution of bringing more young people into the mix to help drive change. They have learned and they often repeat the term digital native. ”we need more digital natives – those younger people who were brought up with this stuff” – someone says, then everyone nods. Hmmm, is it really that easy to solve your problem? Haven’t we heard that story before?
The term digital native was coined by Marc Prensky in 2001. So it’s a thought from the height of the original dot com boom. In fact he was using it to refer to the problem teachers were facing in schools, trying to teach kids who were exposed to modern technology and whose thinking and learning patterns, and expectations, were changing. At that time the issue was the PC web – which was only a few years old.
However, 2014 is the 25th anniversary of the invention of the web. Those middle aged business leaders have been using it personally for something like 15 to 20 years. I’m 51 – but I find it hard to remember quite what an average working day was like pre-Google, let alone pre internet email. When I travel, I see many baby-boomer senior business leaders in airport lounges – plugging in their tablets, and checking their smartphone apps. In those same airports I see them thumbing Wired magazine and lusting after the coolest digital gadgets like Sonos home sound systems, Tesla cars and Oakely Airwave augmented reality ski goggles. Those items are not cheap – so that older age group must be the biggest part of the target demographic. Those travelers then go home via their Uber pickup, to their middle aged spouses who tell them all about what friends and family are saying on Facebook, while flicking through tonight’s viewing options on Netflix and browsing Twitter. They’ve adopted an awful lot of stuff into their every day lives in the last 5 years – for such clumsy, bumbling old-timers – don’t you think?
Being far too old to be a Presnky cohort digital native, didn’t stop Steve Jobs (born 1955) and Johnathan Ive (born 1967) from creating the iPad or iPhone you might be holding in your hand right now. So why would you, as a powerful middle aged senior leader, believe that “only the kids” can move this stuff forward in your company? It seems to me there’s a fine line between belief in youth as a powerful and distinctive enabler, and just trying to shove the issue away from your own personal set of responsibilities because you want to wriggle out of it.
Yes, there are some new digital things out there that only the young people are experienced in – because those things were designed specifically for them. Grown ups don’t use Snapchat much. On the other hand, the global professional recruitment industry is being disrupted by LinkedIn – and that was never built for kids ( it was created by by Reid Hoffman – born 1967 ). Even if you think that significant digital innovation only originates with very young professionals in the first few years of their careers – their inspiration needs a lot of support and deep, deep understanding from older leaders, to help it thrive. Eric Schmidt of Google was born in 1955. Jeffrey Immelt, who is making a huge bet on the “industrial internet” at GE, was born in 1956 – and I doubt the engineers building it for him are all fresh-out-of-college twenty-somethings.
Digital technology is now a deep and pervasive part of the lives of almost all age groups in society. As a leader you have to own your share of the responsibility for moving the agenda forward in your company. Too many people are saying “digital natives” as part of a smart-sounding sound bite, that is actually masking an an intent to do little about the digital change themselves.
Here’s my bottom line. The term digital native was very powerful in its time, but if its primary use these days is as an excuse for middle-aged, middle-management inaction – maybe its time we retired it.
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by Mark Raskino | March 5, 2014 | 2 Comments
This week I have noticed two new major Chief Data Officer (CDO) appointments, showing that this C-suite trend is continuing to progress steadily. We do not believe it’s a fad. As enterprises slowly recognize the centrality of information to their business strategies and the need to manage it as an asset, the requirement for active, executive level management becomes obvious.
- One of America’s biggest banks, Wells Fargo, appointed Mr. A. Charles Thomas as its CDO – an action significant enough to warrant a short article by Wall Street Journal technology editor Michael Hickens. This CDO reports to the bank’s CIO.
- The City of San Francisco revealed that Ms. Joy Bonaguro has started work as its CDO. Aptly for this digital age, the news came via a tweet from its CIO.
Several trends are confirmed by these appointments:
- Most CDO appointments are in the United States. It does happen in Europe and elsewhere, but its still heavily US dominated.
- The top two industries creating true CDO roles are banking and government.
- Women are highly visible in this role. About a quarter of CDOs so far, are female. That’s double the percentage in the CIO population.
However one trend is being challenged. Up to now, we have noticed nearly all the CDOs in the US are on the East Coast – and mostly within three cities: New York, Washington DC and Boston. These two major appointments are both located in San Francisco. It appears that the #1 tech state is starting to get the CDO idea too.
Is your organisation considering creating a true (C-level of thereabouts) chief data officer role? We have been tracking this for a couple of years. We have a detailed job description template and other useful research reports to help you get the rationale and the scoping right first time.
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