Register at the information session on June 7, 2016 from 18:30, in the premises of Solvay Brussels School (42 avenue Franklin Roosevelt, 1050 Brussels (Atrium on the ground floor). This completely free evening, which includes a walking diner, will let you ask the organisers all your questions.
Microservices architectures. Often argued as service-oriented architecture both done right and made practical, the approach of lightweight, modular, stateless, API-enabledmicroservices have come into their own recently, with numerous compelling examples, in particular the success of Netflix with the approach, to the point that most organizations should carefully consider the technique given the known benefits. This includes scalability, reliability, cost-effective operation, improved resiliency, an easy path to containers, and ease of deployment. Recent survey data has shown the microservices are now in production already in a third of organizations today.
Digital learning, MOOCs, global solutions networks. Not noticed as much outside of the learning and development industry are the rapid changes that digital technology is having on human learning. Improving learning enables both the fuller realization of workforce potential and is also the path to becoming and staying a digital leader, as maintaining effective digital skills in the pace of very rapid technological progress is perhaps our greatest challenge today, and is why education technologies have remained on the list. From digital learning tools for the individual such adaptive learning, for which students are reporting very positive responses, to massive open online courses (MOOC), to global solutions networks so entire industries can learn from each other, remain the top learning technologies in 2016 as I explored in my vital digital trends list last year. Rapid growth is particularly evident in the MOOC industry, which is currently growing exponentially and recently reached 4.55K total available online courses.
Public cloud. Few enterprises have shifted entirely to public cloud yet, but that increasingly appears to be the ultimate end state when looked at over a timescale longer than 18-36 months. While private and hybrid cloud are considered ‘starter cloud’ models for most organizations, recent data show that public cloud will ultimately dominate. While still having the smallest level of adoption compared to private and hybrid, public cloud has a highest rate of growth, at a ferocious average annual compound annual rate of 44% through 2019. Public cloud will now overtake private cloud in usage between 2017 and 2018. Probably the latest significant shift in the public cloud landscape is that Microsoft Azure is finally making real — though still early — gains against against uber-dominant market leader’s Amazon Web Services’s impressively full spectrum of cloud offerings.
Team collaboration. The poster child in the revitalization of this space continues to be the success story of Slack, a real-time messaging application that has blazed a unique trail and discovered a new model for effective team-based collaboration, one that is extremely lightweight, channel organized, and connects with a large number of 3rd party applications to create a singular, personalized, and impactful collaboration experience. While enterprise social networks, the leading new model for collaboration before now, still excel at mass collaboration at the organization and departmental level, I suggested earlier this year that most organizations must prepare for a multi-layered collaborationapproach that incorporates these new lightweight tools. The big enterprise vendors are responding in kind or with other innovative approaches. Notable examples include Project Toscana from IBM, Microsoft’s new Gigjam, and even Google’s new Spaces.
Hybrid cloud. For many an important interim step, hybrid cloud allows moving workloads out to the public cloud when it makes sense for reasons of cost, control, scalability, and security. While I believe that enterprises should not wait to learn about the full set of issues they will encounter in moving to public cloud — and the best way to do that is to try to get there as quickly and completely as possible — hybrid cloud is the second best options. Most organizations should be seriously investing in hybrid cloud in 2016 if they are not ready for a more direct move to public cloud. Hybrid is also the most popular cloud option according to the latest available data, with 18% and 6% doing public-only and private-only cloud respectively, and 71% of organizations survey having instead a hybrid cloud infrastructure currently.
Social business (internal and external.) The journey of creating more networked and collaborative organizations with our customers, partners, and employees by employing social tools remains a major and still unfolding trend that many organizations are currently grappling with. The latest data shows that social business remains a fast-growth industry. Probably the most thorough view currently on how the practice and technologies are reshaping organizations is in McKinsey’s just-released a broad based new examination of the results organizations are achieving with social business. Research firm Technavio reported earlier this year that social business investment will have an annual compound growth rate of 26% through 2019, to reach $23 billion ≈ cost of 2004 Hurricane Ivan
≈ Harry Potter movie franchise revenue
≈ cost of 2005 Hurricane Wilma
≈ cost of construction of Channel tunnel connecting the UK to France
≈ Manhattan Project, the original US program to develop the atomic bomb
“>[≈ net worth of Charles Koch, American business man, 2011].
Machine learning and artificial intelligence. If the amount of venture investment taking place in an industry is indicative of future growth, machines that might actually be able to think for themselves in the name of solving hard business problems is on a hot streak. Elon Musk himself recently invested in the OpenAI initiative, which is a $1 billion ≈ box office sales of The Jungle Book, 1967
≈ box office sales of ET: The Extra-Terrestrial, 1982
≈ box office sales of The Exorcist, 1973
≈ box office sales of Jaws, 1975
“>[≈ net worth of J.K. Rowling, author of the Harry Potter series, 2011] backed think tank to research the key issues and ensure that AI will be a “benefit to humanity”. Yet the revenue of the industry is currently a minuscule $202 million [≈ Mitt Romney assets in 2011] today, showing that a lot more is about to happen. This is expected change dramatically growth-wise, with artificial intelligence industry expected to bring in over $11 billion ≈ MIT university endowment in 2011
Collaborative economy. Also known as the sharing economy, startups like Uber and Airbnb showed showed definitively that peer sharing as a business model based in the real-world yet deeply enabled by digital technology, not only had legs but could permanently displace market leaders that used more traditional methods of value creation. While leading thinkers in the space such as Jeremiah Owyang have noted that in 2016 we’re now in the early maturity phase of the collaborative economy, the collective growth has barely begun. The fundamental reason every company must now consider the opportunities and threats that these transformational business models bring to the table? The economics: The total size of the market is anticipated to be vast, withPwC pegging it at $335 billion ≈ US annual charitable giving, 2010
and is expected to continue. It is likely, in my opinion, that blockchain will become a major industry soon in its own right. Companies should be looking to leverage the technologies for its strengths in creating far more assurance, safety, and trustworthiness in high value business activities in the connected era.
Big data and data science. While the some of the hype is off the big data trend, the concept of processing vast amounts of data from many disparate sources — to closewhat I’ve noted has been called the “clue gap” — to derive vital insights ahead of competitors. Data-driven business functions of every type now abound, but in my experience, many organizations are still fairly early in their days of actually using the techniques strategically and truly closing open loop processes. One significant issue: Far too many organizations are awash in insights they are not structured or resourced to respond to. The expected growth of the industry tells the story of how much there is still left to do: Wikibon now expects the big data industry to hit $92 billion [≈ Federal Reserve profit in 2010] in revenue by 2026 and maintain an annual growth rate of 14.4% through that time.
Mobile business apps. For a variety of reasons related to new and unfamiliar platforms to enterprise IT developers, mobile device management industry flux, and the sheer churn in the hardware market, mobile business applications have developed far more slowly than consumer apps. Yet the market, by some estimates will be $56 billion ≈ net worth of Warren Buffett, 2011
. Other recent data shows the potential value and overarching trends: 90% of companies will increase mobile app investment in 2016, with those with mobile workforces seeing substantial ROI.
3D printing. The complexities and immaturity of the 3D printing industry often obscures its true promise: The ultimate ability to mass customize and conveniently produce just-in-time virtually all of the objects we need to operate our businesses. Still nascent technology, with decades more of development required, the concept of the Star Trek replicator will eventually achieve real-world fruition through the realization of this technology. The market forecast for 3D printing technology is to reach $30 billion ≈ Hong Kong international airport
≈ Harvard University endowment in 2011
“>[≈ cost of 2008 Hurricane Ike] by 2022, at a 28.5% growth rate. Ultimately, most companies making finished goods must consider how their products can be disrupted by customers producing what they need on-demand at their own facilities.
Real-time stream processing, fast data. While big data purports to be able to process vaster amount of diverse data than ever before, real-time stream processing promises to handle Hadoop-scale continuous data streams in round-the-clock without falling behind. Whether you’re handling data streams from millions of ongoing user interactions or looking for instantaneous stock trading insights, technologies like Apache’s Spark Streaming enables scalable, fault-tolerance processing of vast streams of information. The Spark market alone will be worth $11.5 billion ≈ cost of 1972 Hurricane Agnes
. Speed of development, low cost, and disposal apps that don’t need to be maintained are key advantages that can enable far more situational applications to meet needs for IT solutions as they emerge. 62% of low code developers report completing low code solutions within 2 weeks. I’ve long believed that once successful models were hit upon, low code will unleash a generation of citizen developers, though some have argued that tools like Microsoft Excel have long enabled this.
by the end of 2016. Making everything on-demand, instantly available, and highly elastic has enormous operating and cost advantages, enabling new types of applications heretofore not possible.
Containers. Often cited as one of the key technologies to enable a robust and modern hybrid cloud, containers like Docker continue their rise in 2016 as an effective way to deconstruct monolithic application architectures in favor of lightweight microservices, ushering in far more cloud friendly enterprise architectures.
Ambient personalization. As social channels taxes traditional marketing agencies, the next big push in digital marketing and customer experience is pervasive personalization. Instant real-time provisioning right as you arrive at a site or use a Web applications. This is already happening with online ad retargeting (those ads that follow you around the Internet), but the level of sophisticated is about to go off the charts. Personalizationcurrently tops the list of digital marketing trends in 2016.
Contextual computing. Too much of our IT today still requires us to create and connect the context between different applications. Why can’t our digital calendars help fill out our time sheets? What can’t our CRM system know which client we’re currently visiting and bring up the record automatically when we launch it. The next generation of productivity in the workplace will come from more contextually aware applications that would exhibit what we would otherwise call common sense.
Workplace app integration. Popular messaging apps like Wechat and Slack have shownhow useful it is having important apps integrated in the way we communicate and collaborate. I’ll be released research soon that shows that app integration substantially increases the value of digital engagement. Having been a proponent of app integration in our social tools since the advent of OpenSocial, it now increasingly looks like the way forward has been found.
Adaptive cybersecurity. Cybersecurity routinely makes the top 5 list of CIO concerns. Increasingly, instead of fixed solutions to security issues, artificial intelligence is being incorporated into IT security product to dynamically investigate and respond to unique and emergent security breaches on the fly. MIT recently developed an AI agent that can detect 85% of breaches.
Smart agents, chatbots. Heralded by mobile device agents like Siri and Cortana, or smart devices like Amazon Echo, smart agents and chatbots are going to be a big part of the next wave of user interface, using voice and other high bandwidth channels, according to my analysis of the fast growing space. Dan Grover, WeChat product manager, probably provided the best detailed overview of this significant new approachin a blog post recently. Increasingly consumers will expect their businesses to offer solutions that enable highly convenient, frictionless conversational experiences.
Fog computing. Sometimes known as the Internet of Everything, fog computingdescribes the use of a collaborative cloud of end-user clients or nearby edge devices that can contribute bandwidth, storage, and other resources on demand for higher performance and fault tolerance for demand applications, without the limitations of accessing far away cloud data centers. A continuum of the cloud computing spectrum, there’s always an OpenFog Consortium. Fog computing will enable new types of applications that aren’t possible using more narrow end-to-center cloud architectures.
Using either an Oculus Rift or HTC Vive headset, customers will be able to experience what it’s like to sit inside the car as well as view it from a free-standing position.
Though it certainly sounds impressive, I do wonder if this technology will actually improve or speed up the car-buying experience, or whether it will simply draw out what is an already lengthy decision-making process.
One of the first automotive brands to utilise virtual reality, the Volvo Reality campaign chose Google Cardboard as a way of giving consumers a sneak peek of its latest release.
As part of the promotion for its new XC90 SUV model, Volvo paired Google Cardboard with an app to allow users the simulated experience of being inside the car.
More recently, Volvo announced a new partnership with Microsoft’s HoloLens – one of the newest AR headsets on the market.
Different from VR, augmented reality projects virtual images into view while still allowing the user to interact with the real world around them.
Though the HoloLens feature is yet to be launched in stores, it looks set to revolutionise the standard car demo.
By enabling the configuration of colours, wheel trims and even demonstrating how car sensors work, it should creates an engaging experience for the customer.
As well as automotive brands using VR and AR to improve the car-buying journey, many are also using technology to increase general brand awareness.
Renault Sport’s Clio Cup Experience is a great example of this.
Despite motor racing remaining a rather exclusive sport, Renault’s recent venture into the world of VR gives fans the opportunity to experience it for themselves.
Simulating a lap of the Renault Clio Cup, it offered a 360 degree, spine-tingling insight into what it’s like to drive a race car.
By combining a video game experience with real life sport, Renault capitalises on VR’s ability to transport the user into a whole new world.
Another example of a brand using VR in innovative ways is Toyota.
As part of its TeenDrive365 project in the US, the brand used Oculus Rift to show teenagers the dangers of distracted driving.
By simulating a fully immersive road environment complete with passengers, buildings and obstacles, the user is given a truly realistic driving experience.
Headphones pump in sounds to demonstrate how distractions can massively impact concentration.
By utilising VR for educational purposes, Toyota shows that new technology is not solely reserved for car demos.
Rather, it can be used to improve brand perception, awareness, and even loyalty.
Découvrez le film sur la campagne #OrangeSponsorsYou avec Zinédine Zidane pour l’UEFA EURO 2016™.
Pour nous, ce sont les supporters qui font le football.
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Arrivée des camionneurs
Extrait du film « Les Demoiselles de Rochefort »
Auteur : Jacques Demy / Compositeur : Michel Legrand
(C) 1967 – Warner Chappell Music France & Universal Music Publishing (Catalogue Francis Lemarque)
(P) 1967 – Warner Chappell Music France & Universal Music Publishing
Incumbents needn’t be victims of disruption if they recognize the crucial thresholds in their life cycle, and act in time.
A decade ago, Norwegian media group Schibsted made a courageous decision: to offer classifieds—the main revenue source of its newspaper businesses—online for free. The company had already made significant Internet investments but realized that to establish a pan-European digital stronghold it had to raise the stakes. During a presentation to a prospective French partner, Schibsted executives pointed out that existing European classifieds sites had limited traffic. “The market is up for grabs,” they said, “and we intend to get it.”1Today, more than 80 percent of their earnings come from online classifieds.2
Our framework for understanding the life cycle of industry disruption.
About that same time, the boards of other leading newspapers were also weighing the prospect of a digital future. No doubt, like Schibsted, they even developed and debated hypothetical scenarios in which Internet start-ups siphoned off the lucrative print classified ads the industry called its “rivers of gold.” Maybe these scenarios appeared insufficiently alarming—or maybe they were too dangerous to even entertain. But very few newspapers followed Schibsted’s path.
From the vantage point of 2016, when print media lie shattered by a tsunami of digital disruption, it’s easy to talk about who made the “right” decision and who the “wrong.” Things are far murkier when one is actually in the midst of disruption’s uncertain, oft-hyped early stages. In the 1980s, steel giants famously underestimated the potential of mini-mills. In the1980s and 1990s, the personal computer put a stop to Digital Equipment Corporation, Wang Laboratories, and other minicomputer makers. More recently, web retailers have disrupted physical ones, and Airbnb and Uber Technologies have disrupted lodging and car travel, respectively. The examples run the gamut from database software to boxed beef.
What they have in common is how often incumbents find themselves on the wrong side of a big trend. No matter how strong their ingoing balance sheets and market share—and sometimes because of those very factors—incumbents can’t seem to hold back the tide. The champions of disruption are far more often the attackers than the established incumbent. The good news for incumbents is that many industries are still in the early days of digital disruption. Print media, travel, and lodging provide valuable illustrations of the path increasingly more will follow. For most, it’s early enough to respond. (For a quick guide to assessing your organization’s position in the digital disruption journey, see “Digital disruption: A discussion guide for incumbents.” [PDF-7.6MB])
What’s the secret of those incumbents that do survive—and sometimes even thrive? One aspect surely relates to the ability to recognize and overcome the typical pattern of response (or lack thereof) that characterizes companies in the incumbent’s position. This most often requires acuity of foresight3and a willingness to respond boldly before it’s too late, which usually means acting before it is obvious you have to do so. As Reed Hastings, the CEO of Netflix, pointed out (right as his company was making the leap from DVDs to streaming), most successful organizations fail to look for new things their customers want because they’re afraid to hurt their core businesses. Clayton Christensen called this phenomenon the innovator’s dilemma. Hastings simply said, “Companies rarely die from moving too fast, and they frequently die from moving too slowly.”4
We are all great strategists in hindsight. The question is what to do when you are in the middle of it all, under the real-world constraints and pressures of running a large, modern company. This article looks at thefour stages of disruption from an incumbent’s perspective, the barriers to overcome, and the choices and responses needed at each stage.
Where you are and what you need
It may help to view these stages on an S-curve (exhibit). At first, young companies struggle with uncertainty but are agile and willing to experiment. At this time, companies prize learning and optionality and work toward creating value based on the expectation of future earnings. The new model then needs to reach some critical mass to become a going concern. As they mature—that is, become incumbents—mind-sets and realities change. The established companies lock in routines and processes. They iron out and standardize variability amid growing organizational complexity. In the quest for efficiency, they weed out strategic options and reward executives for steady results. The measure of success is now delivery of consistent, growing cash flows in the here and now. The option-rich expectancy of future gain is replaced by the treadmill of continually escalating performance expectations.
In a disruption, the company heading toward the top of the old S-curve confronts a new business model at the bottom of a new S-curve. The circle of creative destruction is renewed, but this time the shoe is on the other foot. Two primary challenges emerge. The first is to recognize the new S-curve, which starts with a small slope, and often-unimpressive profitability, and at first does not demand attention. After all, most companies have shown they are very good at dealing with obvious emergencies, rapidly corralling resources and acting decisively. But they struggle to deal with the slow, quiet rise of an uncertain threat that does not announce itself. Second, the same factors that help companies operate strongly toward the top of an S-curve often hinder them at the bottom of a new one. Because different modes of operation are required, it’s hard to do the right thing—even when you think you know what the right thing might be.
This simplified model, of a new S-curve crashing slow motion into an old one, gives us a way to look at the problem from the incumbent’s perspective, and to appreciate the actual challenges each moment presents along the way. In the first stage, the new S-curve is not yet a curve at all. In the second, the new business model gets validated, but its impact is not forceful enough to fundamentally bend the performance trajectory of the incumbent. In the third stage, however, the new model gains a critical mass and its impact is clearly felt. In the fourth, the new model becomes the new normal as it reaches its own maturity.
Let’s step through these stages in sequence and see what is going on.
Stage one: Signals amidst the noise
In the late 1990s, PolyGram was one of the world’s top record labels, with a roster boasting Bob Marley, U2, and top classical artists. But, in 1998, Cornelis Boonstra, CEO of PolyGram’s Dutch parent, Koninklijke Philips, flew to New York, met with Goldman Sachs, and arranged to sell PolyGram to Seagram for $10.6 billion ≈ cost of 1989 Hurricane Hugo
≈ cost of 2004 Hurricane Frances
“>[≈ MIT university endowment in 2011]. Why? Because Boonstra had come across research showing that consumers were using the new recordable CD-ROM technology (which Philips coinvented) largely for one purpose: to copy music. In hindsight, this is a good example of how, in the early stages of disruption, demand begins to “purify” and lose the distortions imposed on it by businesses.5
The MP3 format had barely been invented, Napster was a mere gleam in Sean Parker’s eye, and PolyGram was riding at the top of its S-curve—but Boonstra detected the first signs of transformational change and decided to act swiftly and decisively. Within a decade, compact-disc and DVD sales in the United States dropped by more than 80 percent. Similarly, Telecom New Zealand foresaw the deteriorating economics of its Yellow Pages business and sold its directories business in 2007 for $2.2 billion ≈ Cost to buy the world a coke
≈ total US basketball salaries, 2011
≈ cost of US-Mexican War
“>[≈ Average total annual tax break to the five biggest oil companies] (a nine-time revenue multiple)6while numerous other telecom companies held on until the businesses were nearly worthless.7
The newspaper industry had no shortage of similar signals. As early as 1964, media theorist Marshall McLuhan observed that the industry’s reliance on classified ads and stock-market quotes made it vulnerable: “Should an alternative source of easy access to such diverse daily information be found, the press will fold.” The rise of the Internet created just such a source, and start-ups such as eBay opened a new way for people to list goods for sale without the use of newspaper ads. Schibsted was one of the earliest media companies to both anticipate the threat and act on the opportunity. As early as 1999, the company became convinced that “The Internet is made for classifieds, and classifieds are made for the Internet.”8
It’s not surprising that most others publishers didn’t react. At this early stage of disruption, incumbents feel barely any impact on their core businesses except in the distant periphery. In short, they don’t “need” to act. It takes rare acuity to make a preemptive move, likely in the face of conflicting demands from stakeholders. What’s more, it can be difficult to work out which trends to ignore and which to react to.
Gaining sharper insight, and escaping the myopia of this first stage, requires incumbents to challenge their own “story” and to disrupt long-standing (and sometimes implicit) beliefs about how to make money in a given industry. As our colleagues put it in a recent article, “These governing beliefs reflect widely shared notions about customer preferences, the role of technology, regulation, cost drivers, and the basis of competition and differentiation. They are often considered inviolable—until someone comes along to violate them.”9
The process of reframing these governing beliefs involves identifying an industry’s foremost notion about value creation and then turning it on its head to find new forms and mechanisms for creating value.
Stage two: Change takes hold
The trend is now clear. The core technological and economic drivers have been validated. At this point, it’s essential for established companies to commit to nurturing new initiatives so that they can establish footholds in the new sphere. More important, they need to ensure that new ventures have autonomy from the core business, even if the goals of the two operations conflict. The idea is to act before one has to.
But with disruption’s impact still not big enough to dampen earnings momentum, motivation is often missing. Even as online classifieds for cars and real estate began to take off and Craigslist gained momentum, most newspaper publishers lacked a sense of urgency because their own market share remained largely unaffected. And it’s not like the new players were making millions (yet). There was no performance envy.
But Schibsted did find the necessary motivation. “When the dot-com bubble burst, we continued to invest, in spite of the fact that we didn’t know how we were going to make money online,” recalls then-CEO Kjell Aamot. “We also allowed the new products to compete with the old products.”10Offering free online classifieds directly cannibalized its newspaper business, but Schibsted was willing to take the risk. The company didn’t just act; it acted radically.
Now, let’s openly acknowledge how hard it is for a company’s leaders to commit to supporting experimental ventures when the business is climbing the S-curve. When Netflix disrupted itself in 2011 by shifting focus from DVDs to streaming, its share price dropped by 80 percent. Few boards and investors can handle that kind of pain when the near-term need is debatable. The vague longer-term threat just doesn’t seem as dangerous as the immediate hardship. After all, incumbents have existing revenue streams to protect—start-ups only have upside to capture. Additionally, management teams are more comfortable developing strategies for businesses they know how to operate, and are naturally reluctant to enter a new game with rules they don’t understand.
The upshot: most incumbents dabble, making small investments that won’t flatten their current S-curve and guard against cannibalization. Usually, they focus too heavily on finding synergies (always looking for efficiency) rather than fostering radical experimentation. The illusion that this dabbling is getting you into the game is all too tempting to believe. Many newspapers built online add-ons to their classified businesses, but few were willing to risk cannibalizing the traditional revenue streams, which at this point were still far bigger and more profitable. And remember, at this time, Schibsted had not yet been rewarded for its early action: its results looked pretty similar to its peers.
In time, of course, bolder action becomes necessary, and executives must commit to nurturing potentially dilutive and small next-horizon businesses in a pipeline of initiatives. Managing such a portfolio requires high tolerance for ambiguity, and it requires executives to adapt to shifting conditions, both inside and outside the company, even as the aspiration to deliver favorable outcomes for shareholders remains constant.11The difficulty is the tendency to protect the core at the expense of the periphery. Not only are there strong, short-term financial incentives to protect the core, but it’s also often painful to shift focus from core businesses in which one has, understandably enough, an emotional as well as a financial investment.
No small part of the challenge is to accept that the previous status quo is no longer the baseline. Grocery retailer Aldi has disrupted numerous incumbents globally with its low-price model. Aldi’s future success was visible while Aldi was still nascent in the market. Yet many incumbent supermarkets chose to avoid the near-term pain of sharpening entry price points and improving their private-label brands. In hindsight, those moves would have been highly net-present-value positive with respect to avoided loss—as Aldi has continued its strong growth across three continents.
Stage three: The inevitable transformation
By now, the future is pounding on the door. The new model has proved superior to the old, at least for some critical mass of adopters, and the industry is in motion toward it. At this stage of disruption, to accelerate its own transformation, the incumbent’s challenge lies in aggressively shifting resources to the new self-competing ventures it nurtured in stage two. Think of it as treating new businesses like venture-capital investments that only pay off if they scale rapidly, while the old ones are subject to a private-equity-style workout.
Making this tough shift requires surmounting the inertia that can afflict companies even in the best of times.12In fact, our experience suggests stage three is the hardest one for incumbents to navigate. As company performance starts to suffer, tightening up budgets, established companies naturally tend to cut back even further on peripheral activities while focusing on the core. The top decision makers, who usually come from the biggest business centers, resist having their still-profitable (though more sluggishly growing) domains starved of resources in favor of unproven upstarts. As a result, leadership often under invests in new initiatives, even as it imposes high performance hurdles on them. Legacy businesses continue to receive the lion’s share of resources instead. By this time, the very forces causing pressure in the core make the business even less willing and able to address those forces. The reflex to conserve resources kicks in just when you most need to aggressively reallocate and invest.
Boards play a significant role in this as well. Far too often, boards are unwilling (or unable) to change their view of baseline performance, further exacerbating the problem. Often a board’s (understandable) reaction to reduced performance is to push management even harder to achieve ambitious goals within the current model, ignoring the need for a more fundamental change. This only worsens problems in the future.
Further complicating matters, incumbents with initially strong positions can take false comfort at this stage, because the weaker players in the industry get hit hardest first. The narrative “it is not happening to us” is all too tempting to believe. The key is to monitor closely the underlying drivers, not just the hindsight of financial outcomes. As the tale goes, “I don’t have to outrun the bear . . . I just have to outrun you.” Except when it comes to disruption, that strategy merely buys time. If the bear keeps running, it will get to you, too.
The typical traditional newspaper operator, likewise, wasn’t blind to a shift taking place, but it rarely managed to mount a response that was sufficiently aggressive. One notable exception was former digital laggard Axel Springer. The German media company was “a mere Internet midget,” according to Financial Times Deutschland, until it leapt into action in 2005. It went on a shopping spree, acquiring 67 digital properties andlaunching 90 initiatives of its own by 2013.13Like Schibsted, it saw the value pools moving to online classifieds and made the leap. The lesson is that incumbents can win even with a late start, provided that they throw themselves in wholly. Today, digital media contributes 70 percent of AxelSpringer’s earnings before interest, taxes, depreciation, and amortization. The core has become the periphery.
To generate the acceleration needed at this stage of the game, incumbents must embark on a courageous and unremitting reallocation of resources from the old to the new model—and show a willingness to run new businesses differently (and often separately) from the old ones. Perhaps nothing underlines this point more than Axel Springer’s 2013 divestment of some of its strongest legacy print-media products, which accounted for about 15 percent of its sales, to Germany’s number-three print-media player, Funke Mediengruppe. These products, such as the Berliner Morgenpost, owned by Axel Springer since 1959, were previously a core part of the corporate DNA and emblems of its journalistic culture. But no more. They realized that the future value of the business was not just about the continuation of today’s earnings but rather relied on the creation of a new economic engine.
When incumbents lack the in-house capability to build new businesses, they must look to acquire them instead. Here the challenge is to time acquisitions somewhere between where the business model is proved but valuations have yet to become too high—all while making sure the incumbent is a “natural best owner” of the new businesses it acquires. Examples of this approach in the financial sector include BBVA’s acquisition of Simple and Capital One’s acquisition of the design firm Adaptive Path.
Stage four: Adapting to the new normal
In this late stage, the disruption has reached a point when companies have no choice but to accept reality: the industry has fundamentally changed. For incumbents, their cost base isn’t in line with the new (likely much shallower) profit pools, their earnings are caving in, and they find themselves poorly positioned to take a strong market position.
This is where print media is now. The classifieds’ “rivers of gold” have dried up, making survival the first priority, and sustainability and growth the second. In 2013, the CEO of Australia media company Fairfax Media told the International News Media Association World Congress, “We know that at some time in the future, we will be predominantly digital or digital-only in our metropolitan markets.”14True, some legacy mastheads have created powerful online news properties with high traffic, but display advertising and paywalls alone are for the most part not enough to generate a thriving revenue line, and social aggregation sites are continuing to drive unbundling. Typical media firms have had to undertake the multiple painful waves of restructuring and consolidation that may be needed while they seed growth and look for ways to monetize their brands.
For the incumbents who, like Axel Springer and Schibsted, have made the leap, the adaptation phase brings new challenges. Having become majority digital businesses, they’re fully exposed to the volatility and pace that comes with the territory. That is, their adaptation response is less a one-time event than a process of continual self-disruption. Think of Facebook upending its business model to go “mobile first.”15You can’t be satisfied with the first pivot—you have to be prepared to keep doing it.
In some cases, incumbents’ capabilities are so highly tied to the old business model that rebirth through restructuring is unlikely to work, and an exit is the best way to preserve value. Eastman Kodak Company, for example, may have been better off leaving the photography business much faster, because its numerous strategies all failed to save it. When a business is built on a legacy technology that is categorically different from the new standard, even perfect foresight of the demise of film or CDs would not have solved the core problem that the digital replacement is fundamentally less profitable.
The simple fact is that new profit pools may not be as deep as prior ones (as many newspaper publishers have come to believe). The challenge is to adapt and structurally realign cost bases to the new reality of profit pools, and accept that the “new normal” likely includes far fewer “rivers of gold.”
The reality is, most industries are still in stages one, two, and three. That’s why the early experiences of media, music, and travel companies can prove so valuable. These first industries to transition to a digital reality highlight the social and human challenges that by their nature apply to companies in most every industry and geography.
THE DATA INNOVATION EVENT ABOUT DIGITAL TRANSFORMATION
#DIS2016 will focus this year on Digital Transformation and all about managing and monetizing disruptive innovations. Whether created through opportunity capture, adaptive defense or new ventures, today’s digital ecosystems are evolving rapidly. As rapidly as companies compete for top talent, drive higher engagement levels from their customers, and ultimately define their organization’s future profitability. The digital ecosystem needs to be designed, planned and implemented now, as organizations are called upon to integrate the latest virtual technologies, pioneer new business models and guide their organizations toward next generation environments. If smart, robust digital innovation and technology strategies are your priority, you won’t want to miss #DIS2016 as we uncover the keys to success.
May 10th in Brussels during the Data Innovation Summit about Digital Transformation presented by#womenintech.
– Over 40 speakers presented their view on #digitaltransformation
– Sold out: Over 500 experts attended
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The European Data Innovation Hub is a contributing actor in the data innovation ecosystem and supports data professionals throughout Belgium with networking activities, events, training and meeting facilities, e-learning platform, co-working space and mentorship.
We foster grassroots community initiatives and take the burden out of organising them. As a facilitator and catalyst we support the plans and ambition of professionals, academics and government by helping them to connect, organise, share, learn and inspire.
Solvay is pleased to organise the next Executive Education Information Evening on Tuesday, June 7 from 18:30 and invite you to join high calibre professionals seeking to give their careers the decisive boost.
By attending the Information Session on the Executive Master in Digital Marketing and Communication you will be seizing a first rate opportunity to examine closely how these programmes can help you accelerate your career as a marketing or advertising professional. This programmes is the only marketing training that draws together both traditional practices and new digital channels.
Meet the Academic Director and the staff of Solvay’s Executive Education branch to discuss with them your career and the ways in which this program will give you an edge in your professional development.
Many customers today encounter the great divide between Madison Avenue and multichannel marketing. They may be served an ad based on their persona and then receive an email based on an alternate segmentation. However, what if a brand coordinates first-party data from their email database and third party data from the advertiser to send a customized email in the morning and an advertisement in the afternoon to visitors from a “Stranger” segment who abandoned a lead generation form? The customer experience becomes more connected and relevant.
In a marketplace where customer experience is a crucial differentiator, advertising and multichannel efforts must unite to give brands richer audience insights for more relevant marketing, noted Andrew Frank and Adam Sarnerduring the Gartner Digital Marketing Conference 2016. The mutually-shared desire for profitable engagement drives the coordination between advertising and multichannel marketing.
Why a merger makes sense
“Advertising is already part of the multichannel continuum,” noted Mr. Sarner. Customers don’t want separate experiences that mirror marketing’s silos. They see one brand and want one experience.
According to Gartner’s Strategic Planning Assumption, by 2018, over 40% of marketers from global organizations will have insourced programmatic advertising capabilities, up from about 10% today.
Customers don’t want separate experiences that mirror marketing’s silos.
When marketers combine the dynamic creative possibilities of advertising with the personalization of multichannel marketing they better serve their audiences. This richness of customer insight allows marketers to profitably engage customers throughout the various stages of a customer’s buying journey.
Furthermore, programmatic tactics match multichannel tactics and highlight overlapping interests. Both efforts use forms of real-time decision-making. For example, advertisers use real-time bidding and multichannel marketers use real-time engagement. Both seek to make course corrections on the fly. Marrying advertising’s third-party data with multichannel’s first-party data provides a rich behavioral/ demographic mosaic of audience needs and opportunities.
Bring the two sides together with the Action-Value Model
Use a three step Action-Value model focused on audience, action and attribution to operationalize the linkage of advertising and multichannel marketing. Start by identifying the audience and execute disciplined segmentation. Develop segments such as Loyads (loyal advocates), Churners, First timers or Strangers and set marketing goals for each.
Then clarify valuable actions for those segments and set specific values for the actions. Example actions include rating an app, joining a loyalty program, or watching a video. Clarify how much the action is worth and how much it costs. Once you’ve crystallized the actions that matter to your business, set attribution by channel and by action to answer key questions. Did the campaign do anything? Were the results worth it? Were profits maximized?
Pay attention to skill differences
While interests overlap, the skills found in an advertising team are different from those in multichannel. Beyond just the hard skills gaps, there are real and significant cultural differences. Creative, media placement and a host of acronyms – DMP, TMS and DSPs are central to advertising while multichannel focuses on direct mail, email and database marketing. Be mindful of these differences when uniting the two disciplines.
More wearable device enthusiasts own fitness bands than other connected accessories in the US. According to research, close to half of all wearable owners wear the bands, making them almost twice as common as smart watches and three times as common as smart glasses.
The wearable device category continues to advance in the US. This year, eMarketer estimates, usage will grow by roughly 60%, to reach nearly 64 million people ≈ population of Italy, nation
≈ population of United Kingdom, nation
≈ population of Thailand, nation
“>[≈ population of France, nation].
But which type of wearable device is most commonly owned? PricewaterCoopers (PwC) surveyed 1,000 wearable owners in March 2016 in the US to determine just that. Of those polled, the largest share—45%—said they own a fitness band. And not surprisingly, only 12% of device owners said they have smart clothing, a newer entry to the wearables category.
Interestingly, while the PwC reported that smart watch ownership followed fitness bands, at 27% of wearable device owners, an increase in purchases of this type of wearable device could be imminent.
In a 2015 study, The Consumer Technology Association, formerly Consumer Electronics Association, found that of the 74% of US internet users who intended to buy a fitness device in the next 12 months, the smart watch topped the to-purchase list at 35% over a fitness app, wearable fitness device and smart apparel.
At the 9th edition of its annual Interact conference IAB Europe has announced that online advertising grew 11.6% to a market value of €30.7bn in 2014.
The AdEx Benchmark research – the definitive guide to the state of the European online advertising market – revealed that online advertising achieved double digit growth for a fifth consecutive year. All markets participating in the study recorded positive growth andtwenty markets grew double-digit. Mobile and video ad spend continued on their strong growth curves and are now a significant proportion of display and search ad spend.
Townsend Feehan, CEO of IAB Europe, commented “The AdEx Benchmark results highlight the importance of digital advertising for growth in Europe’s economy. We need to ensure that digital advertising enables the European digital sector to compete across the world.”
The IAB Europe AdEx Benchmark study splits the online ad market into 3 broad segments: Display, Search and Classifieds and Directories. Growth in these online advertising formats has been underpinned by shifting uses in devices and changing consumption patterns.
Display advertising outperformed other categories with a growth rate of 15.2% and the pace of Display growth further accelerated versus 2013. In 2014, the total value of the Display ad market was €10.9bn.
Search showed growth of 10.8% – and a market value of €14.7 billion. It continues to be the largest online advertising format in terms of revenue, but has recorded a deceleration in its growth rate in the last three years.
Daniel Knapp, Director of Advertising Research at IHS Technology and author of the research, said, “Our study shows that even the most mature online advertising markets in Europe sustain double digit growth, clearly indicating the economic vibrancy of the sector. This growth is primarily enabled by the proliferation of intelligent data infrastructures. Data is the growth engine behind advertising that serves as a connective tissue between consumers, media and brands.”
The CEE region grew strongly as online advertising is still benefitting from the improvements in broadband infrastructure and the increase in broadband penetration in these markets, which brings more addressable audiences online. However, growth in European online advertising continues to be driven by the most mature online advertising markets in Europe. This is a direct result of investment in formats and targeting capabilities and developing data strategies in a cross-device environment.
As Europe exits the double-dip recession, advertising markets will benefit from increased optimism from brands. Provided that publishers continue to improve their offerings, online advertising spend is well-placed to be the main beneficiary of the larger advertising budgets. Mobile and video will be the primary areas of interest for these brands.
The 2014 Classifieds and Directories market grew 5.8% to €4.9bn showing growth of 5.8%. Classifieds & Directories benefitted from the improvement in the economy, but is increasingly challenged by Paid-for-search and Data-driven Display to compete for advertising budgets.
Mobile now accounts for 17.7% of the display market, with a growth rate of 72.5% compared with 2013.
Online video advertising also showed strong growth, now representing 15.1% of the display market.
Eleni Marouli, a Senior Analyst at IHS and author of the report, “The sustained double-digit growth in online advertising in the last five yearsdemonstrates the continual evolution of the online advertising market. The two formats driving this growth in 2014 were mobile and video. The rise of mobile and video is a reflection of the investment and innovation of the online advertising industry to meet advertiser needs, not just a reaction to shifts in consumption trends”