- Within Healthcare - Genomics England aims to sequence 100,000 genomes, which would create 21 Petabytes of valuable data. A huge step forwards for medical science but still only 0.15% of the UK population.
- Within Automotive – we’ve already seen Tesla release a software update containing the capability for level 2 auto-pilot, but IHS Automotive estimate that it will be more like 2030, before we see self-driving only cars on our roads.
- Within energy, there are currently around 2 million smart meters already installed in UK households. Smart energy GB aims to see connect 26 million households by 2020, so today we’ve reached less than 10% penetration of smart meters.
- According to Canalys, the Global 3D printing market was $3,8bn in 2014, but is set to grow to $16.2bn by 2018. Today, the vast majority of people and businesses do not yet use a 3D printer.
- A slightly more advanced market (but one with an equally long way to go) is the industrial robotics market, where nanorobots may fuel the next wave of growth. However, the consumer robotics market is set to grow 7 times faster by 2019.
- After "60 years of false starts", the Artificial Intelligence market also looks set for exponential growth. Tractica estimate growth from a surprisingly low $202.5m in 2015 to $11.1bn by 2024
Monday, 2 November 2015
Despite 30 years of digitizing analogue information and connecting devices to networks; despite the obvious explosion of eCommerce, mobile, social media; despite the massive disruption to the music industry, newspapers, books, retail, advertising; the digital technology revolution has barely begun.
According to Cisco's former CTO, Padmasree Warrior, we've only reached 1% of the potential connectivity that we will see in the next decade. The exponential growth in connectivity will be driven in part by connecting the remaining 40-50% of the world's population who today do not have access to broadband (most of the technology giants have ambitious programs in place to make this happen via internet balloons or solar powered drones). But the real explosion in connectivity will come through the embedding of sensors, chips and SIM cards into everyday objects – things we wear, things in our home, our infrastructure, factories, machines, buildings, cities; even a bottle of beer can now be connected.
Connectivity on its own is not particularly disruptive, but the combination of the explosion of connectivity with wave upon wave of new technology, (including artificial intelligence, robotics, 3D printing, blockchain etc) will transform previously dumb products into smart, connected products and previously isolated “things” into nodes within smart, self-learning networks. A connected thermostat that previously offered only remote control access via a mobile device, may be transformed into a device that optimises energy consumption and group-buys energy on behalf of a collective. A medical device that checks blood pressure, may be transformed into a diagnostic device that combines multiple sources of data and compares health data with millions of users. Cars may be transformed from metal boxes on wheels into smart fleets of autonomous driving taxis.
Today the speed of change is uncontrollable and unfathomable to most businesses. Today a new technology can reach a critical mass of 50m users in just 35 days. However, what’s both frightening and exciting in equal measure is just how nascent some of these developments still are and how much disruption is yet to occur.
The combinations of these technology-driven developments will impact every company in every industry sector. Companies that have previously only digitized their front end web sites and apps, will see impact up and down the value chain. If every car is connected and autonomous, will motor insurance be needed? Will consumers still buy cars or will cities buy them under peer to peer schemes? If every aspect of my health and wellbeing is connected, how will my health insurance policy change? How will the healthcare system change from treatment to prevention? How will the pharma sector shift from selling pills to delivering outcomes? If robots are set to take 35% of UK jobs, what new careers will emerge? If 3D printing significantly reduces customs and excise duties, how will the tax systems around the world respond? Moreover, if we are already 20 years behind the skills needed in the market today for cyber security, what on earth will the deficit look like when we reach 50, 70, 90% connectivity?
The previous decade of technology-driven disruption has already brought profound change, but things have barely started. Today the questions are getting more and more interesting.
Monday, 27 July 2015
Despite the seemingly daily release of new, smart, connected products, this trend has barely begun. Cisco's CTO, Padmasree Warrior estimates that we have reached just 1% of things that will be connected over the next decade. At the start of mega-trend it's worth thinking about a simple equation to drive success.
SCP = (CJ x C x N2 x AI) x T
Once we've identified the job that the customer is trying to do and the way in which the smart connected product can create value, Connectivity then becomes the second element of the equation. The embedding of a SIM card, chip, beacon or sensor opens up a world of possibility for users to interact with their product, gaining information and insight or allowing a remote control function. However, many smart connected products stop here. They offer simple connectivity to allow customers to, for example, remote control their central heating but little more… At this stage of the equation a great deal of potential value is left on the table.
In order to unlock additional value, it's worth thinking about networks and the value of the data contained within them. A connected fitness monitor, thermostat or jet engine is fine, but one that connects with a broader network is able to release far greater value, allowing users to generate insight from comparative benchmarks e.g. engine or fitness performance against peers. Most fitness monitors do this well, allowing users to compete against both their friends and other users of the network.
Connecting multiple networks can unlock exponential value. For example, connecting a network of thermostats to networks containing electrical appliances, weather forecasts, energy prices, carbon emissions, pollution levels etc gives users far more than just a remote control for their thermostat. Furthermore, by adding artificial intelligence, products can become genuinely smart. Picture the smart thermostat plugged into a network of thermostats to group buy energy based on an algorithm that predicted price rises and discounts, and worked out exactly when to power appliances around the home based on their energy consumption.
The final element of the equation, however, is arguably both the most important as well as the most overlooked. Trust is something that can take years to build up, but can be lost in an instant through a cyber attack, a data privacy breach or an ethics breach. Once it is lost a negative trust score is disastrous and renders the preceding equation entirely worthless.
Without question, smart, connected products offer companies the potential for radical innovation and disruption. Entire business models and propositions can be re-written. But success rests not only the attention given to innovation around customer jobs, connectivity, networks and AI, but also on Trust. Without trust, a smart, connected product is nothing but a ticking time bomb for the share price.
Wednesday, 9 July 2014
Felix sat back and congratulated himself on a job well done. He had been under pressure from activist investors telling him that he wasn’t doing enough in digital, so poaching Clarissa from a silicon valley-based tech giant was a real coup. She was a star performer – Stanford educated and a host of experiences working for tech start-ups, the last of which was acquired by Digital Megavendor inc. Felex knew he had to be seen as placing a bet on digital, but in his heart of hearts he still struggled to see the relevance to his logistics operations, his heavy machinery and some of the clients he worked with who still saw digital as something for their teenagers. As Chief Digital Officer, Clarissa would take care of digital. She would free up valuable time for the c-suite to get on with their real jobs and her appointment may just bump up the share price.
Clarissa joined with high expectations. Felix had made some pretty impressive statements about wanting to place digital at the heart of the company and transform the company by learning from the very best of the digital leaders. She was impressed with his drive and with the fact that whilst he clearly didn’t really understand digital, he wanted to hire a change agent to lead the company through this period of disruption.
A few months into her role, it dawned on Clarissa that her role was simply not set up for success. A host of powerful middle managers and even the CIO just didn’t seem to get it. They were so entrenched in their day jobs and fighting fires that she was never given the face time or the support that she needed. The budget and headcount that Felex had promised her had also failed to materialise, following disappointing quarterly results and a new drive to cut costs and maintain margin. In short she had a weak mandate and no real resources to get things done.
Clarissa’s story is certainly not indicative of every Chief Digital Officers role. Some CDOs are empowered change agents, revitalising and re-imagining the companies that they work for and where that is the case I am fully supportive of the role. But the danger I see in the rush towards creating a Chief Digital officer role is that in some organisations the role is either a parking lot to park all of the challenges that no one else wants to deal with, or a vanity title with little ability to drive real change.
The impact of digital to an organisation is top to bottom – from strategy to customer engagement, operations, risk and tax. Digital should therefore be everyone’s job. If the role of the CDO is to incubate and infuse digital thinking and new ways of working across the company then the mark of success should be when the role is no longer needed.
Friday, 28 March 2014
So your CEO is now enthused by digital transformation? You have a new head of digital, a clear vision and strategy for how to digitise and transform different aspects of your business (from your business model and customer interactions to your supply chain and operations). You’re taking customer-centricity seriously, consuming computing power from the cloud, building in sprints, failing fast, iterating; following everything that the web companies are doing.
Unfortunately success is far from guaranteed. There will be a number of bumps along the road ahead... some of them obvious, some of them less so. Let me give you a quick flavour of 10 of the challenges that you should at least be thinking about:
1. Changing expectations and lack of exec alignment – I worked with a client recently and did a quick and unscientific survey of their exec. Around a third wanted to be extremely disruptive and innovative with digital, a third wanted to raise the bar and get to the level of their closest competitor, a third simply wanted to do the basics and nothing else. It goes without saying but in any major program exec alignment is crucial. In major digital programs, this seems to be even more the case due to the speed at which new technology, consumer expectations and market dynamics are changing and vast differences in what can be achieved (see my post on “digital channel shift vs digital paradigm shift”).
2. Consumer apathy / consumer backlash – if you build it, they might not come. Worst still, they might react angrily. Countless, well-meaning digital PR programs have provoked consumer rage from fury over utilities bills at a UK Utility, to “upper class jibes” at Waitrose to anger at changing pricing at Netflix. Simply digitising content and blasting it out to social networks and apps is a sure-fire way to wasting your investment. Building customer attention let alone engagement is difficult. It’s essential to maintain a razor sharp focus on customer needs and the journeys that they go through. These can be used as a compass to guide investment decisions and focus during a digital transformation program.
3. Regulatory changes – it’s clear that the regulatory world is desperately trying to catch up with the digital world. Topics like privacy, use of data, security of personal information, misleading advertising and even new business models are under attack from governments and regulators worldwide. In the US, the New Jersey Motor Vehicle Commission recently voted to ban the direct sales of vehicles in the state. In Europe, the European Commission are harmonising data protection laws impacting all companies processing the personal data of EU citizens and calling for fines of up to 5% of global group turnover for major data breaches. That cool, funky app that was built in a garage by a couple of creatives had better have thought through data and privacy implications! Brazil also recently passed a bill of rights for internet users.
4. Tax – now I admit that if you get a group of digital professionals together then tax is unlikely to be top of their list of topics to discuss (!). But most tax authorities have realised that their tax systems have a long way to go to catch up with a global digital market place, crypto-currencies, transfer pricing and IP protection. Late last year the European Commission introduced fundamental changes in the way in which digital goods and services will be taxed within the EU. Today it is possible to base a digital downloads business in Luxemberg and pay a flat rate of VAT there of 3 or 15%. From 1st January 2015, companies will have to register and pay VAT where the consumer is located, presenting a significant headache to anyone selling digital goods and services cross-border within the EU and exposing them to much higher rates of VAT such as 27% in Hungary. In addition to the margin impact of these changes and the need to deal with up to 28 different tax authorities, companies will be forced to reconsider their pricing strategies, customer experience and supporting systems in order to comply with the legislation, or face penalties from tax authorities in EU member states looking for new sources of revenue.
5. Technical debt – as easy as it may be to consume computing power from the cloud, technical debt is becoming a major issue. The barrier to entry into the digital world is extremely low and the pace of change extremely high, leading to many organisations developing and launching new apps, micro-sites and platforms in a sporadic and uncontrolled way and building up their technical debt. Gartner assert that by 2017, the CMO will be spending more on technology than the CIO. That spend needs to carry significant responsibility to ensure management of technical debt, including adherence to quality standards, governance, standardisation and re-use, decommissioning legacy applications etc
6. Delivery governance – with the CMO increasingly affecting digital spend and with the supplier eco-system increasingly fragmented into multiple agencies, SaaS vendors, SIs, analytics boutiques and others, delivery governance is becoming extremely challenging. Contrary to popular believe an Agile delivery approach requires strong governance and control, particularly when many third parties are involved. Lack of control of large scale digital technology programs will no doubt see many more major failed mega-programs (see “BBC abandons £100m digital project”)
7. Contracting and commercial challenges – in addition, simply contracting for a digital program can be a headache. Most procurement departments simply have no experience in contracting with a range of SaaS providers, each with different policies and standards regarding up-time, access to data, portability of data etc. Se Ray Wang – “What CFO’s need to know about SaaS and Cloud Integration”.
8. Cyber threats – quite simply there is not a single board today who should not be taking cyber risks seriously. In their Global Risks 2014 report, the World Economic Forum stated “The world may be only one disruptive technology away from attackers gaining a runaway advantage, meaning the Internet would cease to be a trusted medium for communication or commerce”
9. Cannibalisation and channel conflict – by its very nature a digital transformation, disrupts an analogue business model and ways of working. This often causes heated conflict and debate – should we disintermediate our channel partners and sell direct? Should we charge the same price for the digital version? How aggressively do we try and replace today’s cash cow?
10. Skills Shortage – digital has crept into almost every aspect of life with astonishing speed, but knowledge and skills are yet to catch up. The European Commission estimate that in 2015 the EU will face a skills shortage of 900,000 digital professionals. This skills shortage has manifested itself in almost every digital program I have worked on. Success with digital requires a broad mixture of skills from right-brained creative to left-brained technical and analytical. Skills shortages can appear in a broad range of roles from programmers to data scientists to digital tax and legal specialists.
The list above represents just 10 of the most common challenges that I see in digital transformation programs. If you think of others please do let me know!
Friday, 13 September 2013
On one hand digital has democratised. It has created a level playing field for small, disruptive start-ups to launch a new business fast, leveraging computing power in the cloud and motivating peer-to-peer armies of willing consumers to create vast scale at a remarkably low cost (see my posts “Customer to Customer and the legend of Kachwachi” or “Outsource your marketing, sales & service to your customers”).
On the other hand, digital has created a vastly uneven playing field, concentrating enormous power into the hands of digital mega-vendors with enormous data stores, insight into consumer behavior and often one-click billing relationships with huge chunks of the population. More and more we see the mega-vendors moving into new industries like Financial Services (via mobile wallet offerings, virtual currencies etc), Computer & Telephony Hardware (phones, tablets, netbooks etc), Media (music, movies & sports), Automotive (driverless cars), Software, Groceries, Gaming, Communications, Healthcare and many more…
The challenge for the average FTSE 250 or Fortune 500 Company (that might have been around for say 20-50 years) is that they are neither a lean, disruptive start-up; nor are they a digital mega-vendor. They are, in effect, caught between David and Goliath.
The majority of businesses in this category certainly have considerable assets (e.g. brands, relationships, physical outlets, contact centres, contracts with customers etc), but they also have a considerable legacy (e.g. brands (?!), physical outlets (?!), contact centres (?!), contracts with customers (?!) etc). In addition, they also have to deal with the significant challenge of remnants of technology, mind-sets, route to market and operating models that were quite simply designed for an analogue age (see my post on “CRM for a digital age”).
The majority of FTSE 100 / Fortune 500 businesses therefore face a challenge; namely, how they identify and leverage the assets they have, whilst at the same time removing (or transforming) their legacy, in order to compete against both David and Goliath at the same time.
Tuesday, 21 May 2013
I read three thought-provoking articles this week. Firstly, an interview with Cisco’s Padmasree Warrior, published by McKinsey Insights . In the interview, Padmasree Warrior argues that despite 20 years of digital revolution we have only reached around 1% of what could be connected in the world. Over the next 10 years Cisco expect that figure to rise significantly as more and more people, devices and sensors connect.
Secondly, I read Wim Rampen’s latest post “Don’t take the customer decision journey for granted”. As ever, Wim cuts through the hype of terms like “big data” and “customer engagement” and grounds our thinking in a service dominant logic mindset. He argues than rather than throwing more technology at Big Data and assuming that predictive analytics will fix every problem, in fact a greater abundance of data should present us with a greater ability to understand the jobs that customers are trying to do and give us better insight to the barriers they face. In turn this should inform investments that are made to give customers the right information, tools and transparency at each step of their decision journey.
Thirdly, I read today that IBM plan to redeploy Watson for Customer Service (see “Putting Watson to Work” ) by launching the Watson Engagement Advisor that key clients like ANZ Bank, Royal Bank of Canada and Malaysia Telecom will be piloting. This announcement follows hot on the heels of the announcement that Watson would be opened up as a service to developers to build applications around.
Bringing these three streams of thought together could be powerful for customer service. The exponential rise in the number of connected devices over the new few years brings an opportunity to infuse real time data from up and down the value chain into business processes to help customer service make smarter decisions. For example, sensing that parts in the supply chain are delayed, traffic conditions are bad, break pads seem to be showing greater wear than usual after 10,000km... can all help inform decision making, whether that be at a macro level (e.g. issuing a product recall) or at a micro level (pro-actively informing a customer of a delay or simply having all the right information to hand to understand what’s causing the customer’s issue).
The evolution of Watson from Jeopardy winning super-computer to an open, service-based platform could allow customer service organisations to put that smarter decision making into the hands of the customers via whatever device or app they want to use. What I like about the potential for Watson in customer service is that it will start by understanding the job the customer is trying to do (“How can Watson help you today?...”). This has always been the promise of voice self service systems, chat-bots and self service knowledge bases, but none have ever quite had the computing power of Watson to make sense of complex queries and compute vast amounts of structured and unstructured data to find the right answer.
Tuesday, 12 March 2013
I had the pleasure of speaking with Bill Hutchison a couple of weeks ago. Bill is a pioneer in smart cities, working in Canada, Russia and Asia to evangelise the concept of the hyper-connected city and the potential for paradigm-shift thinking that hyper-connectivity presents. Bill chaired the Toronto Waterfront development, one of the largest urban regeneration and connected community projects in the world. One thing he said to me which resonated was that the last 20 years of digital innovation and disruption have simply set the foundation for even greater change to come. One of the opportunities of digital disruption is the potential it offers to think about paradigm shifts.
Many clients I have worked with over the years have approached digital as a channel-shift project - "if we could shift 10% of calls from our call centre to our smartphone app we would save x%", "if we could switch x% of loan applications to online we would save y% and acquire z% more clients". There's nothing necessarily wrong with that approach but the history of new technology adoption is littered with examples of people using a new technology to enable an old process or an old way of working. Putting a loan application online is not necessarily going to change the game or protect against a future industry disruptor.
10 years ago Nike has very little idea who purchased their trainers and how they used them. Consumers made anonymous purchases in sports shops and department stores and rarely bothered to fill in a registration card to tell Nike about themselves, let alone how they used their trainers. Nike could have adopted a channel shift mindset and approach to digital, creating an online portal for people to register their purchases and upload information about their training regimes. They could have done that but they chose a paradigm shift strategy. By embedding software into trainers via Nike+ and building a gamified community where users set their training goals or participate in virtual / physical games of "tag", Nike has transformed the information and insight that it has about it's consumers. At the point of writing a staggering 2,146,741,969 miles have been run by the community and automatically uploaded to Nike.
GiffGaff could have launched an MVNO with a channel shift strategy. Instead they chose a paradigm shift by creating a peer to peer business model where customer word of mouth drives acquisition and members fix over 90% of service requests for other members in the support forum with an average time to fix a problem of under 3 minutes.
Zopa could have followed a channel shift approach and launched an online only business selling loans, but they chose a paradigm shift model by creating a peer to peer lending forum.
Threadless, Zappos, Kickstarter, eBay, ZipCar, Nabbesh (client), Netflix, Salesforce.com, Amazon, NowTV (client), CDBaby, Spotify, Lastminute.com and many others all could have pursued channel shift strategies in their respective industries... but they didn't.