Ebay has thrown down the gauntlet to Amazon announcing its very own “blockbuster” sales event to troll its online rival.
In an effort to cash in on the Amazon Prime day hype, Ebay has said it is set to launch a “Crash Sale”, a thinly veiled dig at Amazon’s propensity to crash during its Prime Day event, thought to have cost it around $90 million last year.
Ebay will offer discounts of up to 50 per cent on leading technology brands including Apple, Samsung, KitchenAid, Garmin and LG during Amazon’s 48-hour Prim Day event beginning on July 15.
We’re crashing the party with deals on things you actually want. Stay tuned. #CrashingPrimeDay
However, if Amazon should crash during the event, Ebay has promised to pile on more “too-good-to-be-true” deals to abate shoppers need for a tech bargain.
This forms part of a wider sales event for Ebay, which will be offering deals of up to 85 per cent off certain items for three weeks starting July 1, including robot vacuums, stand mixers, smart home gear and more.
L’année 2018 étant sur le point de se terminer, c’est l’occasion de regarder dans le rétroviseur et récapituler toutes les entreprises rachetées par Apple. Certaines acquisitions sont connues et d’autres non, parce qu’Apple est généralement discret sur le sujet.
— Buddybuild : une start-up canadienne qui propose un service en rapport avec le développement d’applications. Elle a rejoint l’équipe en charge de Xcode (l’outil que les développeurs utilisent pour créer leurs applications pour les produits Apple).
— Texture : un service qui peut être présenté comme le « Netflix des magazines ». Contre un abonnement mensuel, tout abonné peut lire en illimité de nombreux journaux et magazines. Le service devrait être intégré dans l’application Apple News à l’avenir.
— Akonia Holographics : une start-up américaine qui fabrique des verres utilisés dans des lunettes de réalité augmentée. Cette acquisition suggère de plus en plus qu’Apple veut se lancer dans le domaine des lunettes connectées.
— Shazam : application populaire qui permet d’identifier une musique en cours de lecture. L’application iOS et Android n’a plus de publicité depuis quelques jours, suite au rachat par Apple.
— Spektral : le rachat de cette société danoise a eu lieu en décembre 2017, mais n’a été dévoilé que cette année. Elle a conçu un outil qui sait séparer une personne ou un objet de l’arrière-plan, tout ça en temps réel.
— Silk Labs : une start-up consacrée à l’intelligence artificielle, dont ses créations peuvent être utilisées dans des produits comme des appareils photo et des enceintes.
— Platoon : une start-up qui a pour vocation de découvrir de nouveaux artistes musicaux.
Outre les acquisitions, il y a eu des embauches de personnes importantes chez d’autres boîtes, dont Silicon Valley Data Science, Dialog et Asaii. Apple n’a pas mis la main sur les sociétés en entier ici.
Google has invested the most in artificial intelligence (AI) out of the tech giants, according to research from RS Components.
Since the first acquisition in 1998, tech giants have spent nearly $8.6 billion on AI startups.
Google has invested the most money in artificial intelligence (AI), according to research from RS Components. Tech giants have disclosed nearly $8.6 billion in acquisitions since 1998.
The company has spent nearly $3.9 billion in disclosed deals since 2006, with the bulk of that spent in its 2014 acquisition of Nest Labs for $3.2 billion. The Nest Labs purchase was the single largest disclosed investment on RS Components’ list, which includes 103 startup purchases across 15 tech giants.
Here are the top 10 tech companies based on how much they’ve spent acquiring AI startups where the price was disclosed.
1. Google – $3.9 billion
2. Amazon – $871 million
3. Apple – $786 million
4. Intel – $776 million
5. Microsoft – $690 million
6. Uber – $680 million
7. Twitter – $629 million
8. AOL – $191.7 million
9. Facebook – $60 million
10. Salesforce – $32.8 million
Google continued its domination in total number of acquired startups, investing in 29 since its first, Neven Vision, in 2006. Apple grabbed second with 14, and Microsoft was third with nine.
Microsoft was the first to invest in AI, spending $40 million on Firefly Network in 1998. Google was next to invest, but didn’t do so for another eight years.
Here are the eight single biggest disclosed investments in AI startups to date.
1. Nest Labs – $3.2 billion
2. Kiva Systems – $775 million
3. Otto – $680 million
4. Deep Mind – $500 million
5. TellApart – $479 million
6. Movidius – $400 million
7. Nervana – $350 million
8. SwiftKey – $250 million
The pace and price of startup acquisitions are unlikely to drop as AI continues to grow as a technology.
Hardware, e-commerce, and and advertising make up 76% of all revenues.
Meanwhile, software isn’t the cash cow it used to be, but it does help serve as a means to an end for some companies. For example, Android doesn’t generate any revenue directly, but it does allow more users to buy apps in the Play Store and to search Google via their mobile devices. Likewise, Apple bundles in operating systems with each hardware purchase.
Google Glass, which cost $1,500 ≈ High-end bicycle
“>[≈ Smartphone cost per year] for those invited to a sort of public beta test, never took off. The relatively powerful head-mounted computer provided important signals for the future of wearable technology. Glass showed that designers working on computing devices that are worn face a different set of assumptions and challenges. Glass, for example, made it easy for users to surreptitiously record video, which led some restaurants, bars and movie theaters to ban the device. Glass also showed the potential pitfalls of easily identifiable wearables, perhaps best proven by the coining of the term “Glassholes” for its early adopters. While Glass was officially shelved in 2015, augmented reality—displaying computer-generated images over the real world—is a concept many companies are still trying to perfect. Google included.
The Makerbot Replicator was neither the first nor the best consumer-level 3-D printer. But it was the model that made the technology widely accessible for the first time, thanks to its sub-$2,000 [≈ One Starbucks latte per day for a year] price tag. The Replicator used inkjet printer-like technology to extrude hot plastic that took three-dimensional form as artwork, mechanical parts and more. As a company, Makerbot’s future is uncertain. But the firm’s equipment helped bring 3-D printing into the mainstream and is a fixture of many American classrooms.
Why is the Segway personal scooter such a potent cultural symbol? Maybe it has something to do with providing a metaphor for increasingly out-of-shape Americans. Perhaps it was seeing a U.S. president fall off one. Weird Al’s “White and Nerdy” video helped, too. The Segway—as hyped and as mocked as it has been—is a defining example of “last mile” transportation, an electric scooter designed to make walking obsolete. (Recently, the idea has been somewhat revived by the emergence of so-called hover boards, which are now also entering a kind of post-fad twilight.) The Segway’s symbolic impact greatly exceeded its commercial success. Unit sales never exceeded the six-figure mark before the firm was purchased by a Chinese interest in 2015 for an undisclosed sum.
Yamaha Clavinova Digital Piano
You could argue the Minimoog did far more for music tech, or that the Fairlight was cooler, but visit average U.S. households from the 1980s forward and you’re most likely to encounter the Clavinova. Yamaha’s popular digital piano married the look and compactness of a spinet (a smaller, shorter upright piano) with the modern qualities of a modest synthesizer. With a plausibly pianistic weighted action and space-saving footprint, it’s become a staple for parents looking to bring maintenance-free musicality—you never have to tune it—into households, all without sacrificing huge swathes of living space.
Small drones may soon be delivering our packages, recording our family get-togethers and helping first responders find people trapped in a disaster. For now, they’re largely playthings for hobbyists and videographers. Chinese firm DJI makes the world’s most popular, the Phantom lineup. Its latest iteration, the Phantom 4, uses so-called computer vision to see and avoid obstacles without human intervention. That makes it easier for rookie pilots to fly one, making drones more accessible than ever.
The Raspberry Pi is a single-board computer with a price tag to match its tiny size: about $35, without a monitor, mouse or keyboard. Not meant to replace everyday computers, the Pi is being used in classrooms worldwide to help students learn programming skills. With eight million Pi’s sold as of last year, the odds are decent that the next Mark Zuckerberg will have gotten his or her start tinkering with one.
Developed by the “godfather of the iPod,” Tony Fadell, the Nest Learning Thermostat was the first smart home device to capture mass market interest following its launch in 2011. Pairing the iconic round shape of classic thermostats with a full-color display and Apple-like software, the Nest features considerable processing power. (For instance, its ability to use machine learning to detect and predict usage patterns for heating and cooling a home.) As interesting as the device itself is, the Nest thermostat really turned heads in 2014 when the company behind it was bought by Google for $3.2 billion ≈ box office sales of Snow White and the Seven Dwarfs, 1937
≈ net worth of George Lucas, creator of Star Wars, 2011
≈ total US football salaries for all teams, 2011
“>[≈ box office sales of Gone with the Wind, 1939]. The search engine giant turned the device into the center of its smart home strategy with hopes of ushering in an age of interconnected devices that will make everyday living more efficient.
When you think of a portable computer, the Osborne 1 is probably not what comes to mind. But this unwieldy 25-pound machine was heralded by technology critics at the time of its 1981 release—BYTE magazine celebrated that it “fit under an airline seat.” The Osborne’s limitations, like a screen about the size of a modern iPhone’s, kept sales low. The machine’s true influence wasn’t on future gadgets, so much as how they are marketed. The company’s executives had an unfortunate knack for prematurely announcing new products, leading would-be customers to hold off for the better version and thus depressing sales. Marketing students now learn to avoid this deleterious “the Osborne effect.”
Pedometers have been around for centuries (seriously, look it up), but it was Fitbit that helped bring them into the digital age and to the masses. The company’s first device, released in 2009, tracked users’ steps, calories burned and sleep patterns. Most importantly, it allowed users to easily upload all that data to the company’s website for ongoing analysis, encouragement or guilt. Priced at $99, the Fitbit showed that wearables could be affordable. The company sold more than 20 million of the devices in 2015.
Roku Netflix Player
An inexpensive upstart running Linux, Roku’s hockey-puck sized Netflix-and-more video streaming box emerged out of nowhere in 2010 to rally waves of cord-cutters who cancelled their cable. What its chunky remote lacked in features, the box more than made up for in software. While at first Apple struggled to rationalize its comparably barren Apple TV-verse, Roku was offering thousands of channels and the most partnerships with the biggest players.
Sony Discman D-50
Following up on the success of the Walkman, Sony unveiled this portable CD player in 1984, just a year after the music industry adopted the format. The device and later portable CD players helped the compact disc usurp cassettes as the dominant music format in the United States in less than a decade.
2016’s Oculus Rift virtual reality headset could wind up a total flop and we’d still grant Oculus a special place in computing history. And not just because Facebook paid $2 billion ≈ cost of Virginia-class submarine
≈ 2008 presidential contributions
“>[≈ Average total annual tax break to the five biggest oil companies] for the device’s parent company foreseeing a future of social interaction and virtual vacationing provided by VR. Whatever happens next, the Rift, along with ebullient creator Palmer Luckey, will be remembered for reinvigorating the notion of strapping awkward-looking things to our faces in trade for the privilege of visiting persuasively real imaginary places.
The iBook’s brightly-colored, plastic trim may look dated now, but it was the first laptop to offer wireless networking. Apple’s consumer-oriented portable—for its cool-factor as well as its technology—grew into a serious business. The product’s reveal was a classic example of Steve Jobs’ showmanship at its best. While loading a webpage and showing off the computer’s display at 1999’s MacWorld conference, the Apple co-founder lifted the computer off its table and walked across the stage. The crowd roared in approval. In a gesture, he showed that Wi-Fi was here to stay.
Motorola Dynatac 8000x
Motorola’s Dynatac 8000x was the first truly portable cellphone when it launched in 1984. Marty Cooper, an engineer with Motorola at the time, first demonstrated the technology by making what’s regarded as the first public cellular phone call from a New York City sidewalk in 1973. (It was both a PR stunt and an epic humblebrag: Cooper called his biggest rival at AT&T.) The Dynatac 8000x weighed nearly two pounds and cost almost $4,000 ≈ Typical annual cost of car ownership
≈ Per capita income – Mexico, 2006
“>[≈ Per capita income – China, 2004].
The original Palm Pilot 1000 solidified handheld computing when it launched in 1996, paving the way for BlackBerry and, eventually, today’s smartphone. The “palm top” computer (get it?) came with a monochrome touchscreen that supported handwriting and was capable of syncing data like contacts and calendar entries to users’ computers. It spawned a device category known as the “personal digital assistant,” or PDA. It wasn’t the first such device—the Apple Newton preceded it—but it was the first one people wanted and bought in droves.
Obsoleting noisy, lousy dot matrix technology, devices like 1988’s HP DeskJet gave computer owners the ability to quietly output graphics and text at a rate of two pages per minute. The DeskJet wasn’t the first inkjet on the market, but with a $995 [≈ Traditional cell phone cost per year] price tag, it was the first one many home PC users bought. Over the 20 years following the product’s launch, HP sold more than 240 million printers in the DeskJet product line, outputting Christmas letters, household budgets, and book reports by the millions. Even in an increasingly paper-less world, the inkjet’s technology lives on in 3-D printers, which are fundamentally the same devices, only extruding molten plastic instead of dye.
For many, Nokia’s colorful candy bar-shaped 3210 defined the cell phone after it was released in 1999. With more than 160 million sold, it became a bestseller for the Finnish company. The 3210 did more than just introduce the cellphone to new audiences. It also established a few important precedents. The 3210 is regarded to be the first phone with an internal antenna and the first to come with games like Snake preloaded. Gadget reviewers even praised the phone more than 10 years after its launch for its long battery life and clear reception.
Jerrold Cable Box
True story: Cable TV was already a thing in the 1950s. Sure, it took Ted Turner in the 1970s and channels like MTV in the 1980s for what we think of as cable TV’s halcyon days to emerge. But decades earlier, the first commercial cable box that would inspire so many others was an unassuming wood-paneled console manufactured by Pennsylvanian company Jerrold Electronics, sporting three-way sliders for dozens of different channels.
“Thanks to Nintendo’s Satoru Iwata, we’re all gamers now,” went the headline of Wired’s obituary for Nintendo’s beloved president, who died last July. Nothing speaks to Iwata’s legacy more than the company’s game-changing Wii (pun intended). Nintendo’s tiny pearl-white box, released in 2006, and which users engaged with motion control wands, had moms and dads and grandpas and grandmas out of their seats and swinging virtual golf clubs or dancing. No game system has done more to illustrate the omni-generational appeal of interactive entertainment.
You’d be hard pressed to name a single PlayStation feature that by itself transformed the games industry. It’s been Sony’s obsession with compacting high-end tech into sleek, affordable boxes, then making all that power readily accessible to developers, that’s made the PlayStation family an enduring icon of the living room. Part of Sony’s triumph was simply reading the demographic tea leaves: The company marketed the PlayStation as a game system for grownups to the kids who’d literally grown up playing Atari and Nintendo games. And that helped drive the original system, released in 1994, to meteoric sales, including the PlayStation 2’s Guinness record for bestselling console of all time—a record even Nintendo’s Wii hasn’t come close to breaking.
Toshiba DVD Player
Electronics manufacturers were already fiddling with standalone optical storage in the early 1990s, but the first to market was Toshiba’s SD-3000 DVD player in November 1996. Obsoleting noisy, tangle-prone magnetic tape (as well as the binary of “original” versus “copy”) the DVD player made it possible to watch crisp digital movies off a tiny platter just 12 centimeters in diameter—still the de facto size for mainstream optical media (like Blu-ray) today.
“How much would you pay never to see another talking frog or battery-powered bunny again?” this magazine asked when the first TiVo was announced in 1999. The box, called a “Personal Video Recorder” at the time, is the forerunner to today’s DVRs. TiVo owners could record shows picked from a digital menu (no more confusing VCR settings) and pause or rewind live television. Much to TV execs’ consternation, the TiVo let viewers of recorded programming breeze past commercials. That the TiVo made it easier than ever to record a TV show gave rise to “time-shifting,” or the phenomenon of viewers watching content when it fits their schedule.
Amazon began as an online bookstore, so it’s no surprise that its most influential piece of hardware changed the way we read. The Kindle quickly took over the e-reader market, becoming the best-selling product in the history of Amazon.com in 2010. Follow-up hardware ventures, such as the Kindle Fire Tablet and Echo home assistant, have also found success. The Kindle also marks the beginning of Amazon’s evolution as a digital media company. Today the company has digital stores for music, movies and video games in addition to books.
Millennials get plenty of flak over their penchant for instant gratification. But that’s a desire that crosses generations. Need proof? When the first affordable, easy-to-use instant shooter, the Polaroid OneStep Land camera, hit the market in 1977, it quickly became the country’s best-selling camera, 40 years before “Millennials” were a thing. That Polaroid photographs so dominated 80s-era family albums and pop culture gives the square-framed, often off-color snaps a retro appeal that today is celebrated by enthusiasts and aped by billion-dollar apps like Instagram.
Commodore’s 8-bit brown and taupe lo-fi 1982 masterpiece ranks with record-keeper Guinness as the best-selling single computer in history. No surprise, as the chunky, relatively affordable keyboard-housed system—users plugged the whole thing into a TV with an RF box—did more to popularize the idea of the personal home computer than any device since. And it promised to make you more popular, too: “My friends are knockin’ down my door, to get into my Commodore 64,” sang a Ronnie James Dio clone in a power-metal ad spot.
The iPad’s 2010 launch spurred a slew of headlines questioning whether or not the tablet would replace the laptop as the most important personal computer. Apple’s iPad wasn’t the first tablet, but it was radically different from what came before. Earlier devices, like the GriDPad and Palm Pilot, had smaller touchscreens users had to operate with a stylus. Microsoft unveiled a tablet that ran Windows XP in 2002. The problem, however, was that these devices didn’t have interfaces that were well-suited for touch, and they were often clunkier and larger than the iPad. Apple sold 300,000 iPads on its first day in stores, roughly matching the iPhone’s day-one numbers, and has gone on to dominate the market.
BlackBerry made pocket-sized gadgets for accessing email on-the-go before the 6210, but this was the first to combine the Web-browsing and email experience with the functionality of a phone. The 6210 let users check email, make phone calls, send text messages, manage their calendar, and more all from a single device. (Its predecessor, the 5810, required users to attach a headset in order to make calls.) All told, the 6210 was a pivotal step forward for mobile devices.
Phonemate 400 Answering Machine
The idea of an answering machine weighing more than a few ounces may sound ludicrous by today’s standards. But in 1971, PhoneMate’s 10-pound Model 400 was viewed as a glimpse of the future. The Model 400 was considered the first answering machine designed for the home during a time when the technology was only commonly found in workplaces. It held roughly 20 messages and enabled owners to listen to voicemails privately through an earphone.
Like the early Internet, GPS started life as a government-funded innovation. It wasn’t until President Bill Clinton decided in 2000 to fully open the network that it became a massive commerical success. (He was filling a promise made by Ronald Reagan.) Shortly afterwards, companies from TomTom to Garmin introduced personal GPS devices for automotive navigation (like the Start 45) and other uses. Later, combining GPS technology with smartphones’ mobile broadband connections gave rise to multibillion dollar location-based services like Uber.
IBM Thinkpad 700C
Few products are so iconic that their design remains largely unchanged after more than 20 years. Such is the case with the ThinkPad line of laptops, which challenged the dominance of Apple and Compaq in the personal computing industry during the early 1990s by introducing features that were considered to be innovative at the time. (It’s also part of the permanent collection at New York City’s MoMA.) One of the earliest in the line, the ThinkPad 700C, came with a 10.4-inch color touch screen, larger than displays offered by other competing products. Its TrackPoint navigation device and powerful microprocessors were also considered to be groundbreaking in the early 1990s.
Other Android-powered smartphones existed before the Droid launched in 2009, but this was the first one popular enough to push Android into the spotlight. It cemented Google’s Android platform as the iPhone’s biggest competition. (And sowed a rift between Apple and Google, which had previously been close allies.) Verizon is said to have poured $100 million[≈ Large city office building] into marketing the device. It seemingly paid off—although neither companies disclosed sales figures, analysts estimated that between 700,000 and 800,000 Droids were sold in roughly one month following its launch.
JVC VideoMovie Camcorder
From Rodney King and citizen journalism to America’s Funniest Home Videos and unscripted television, the camcorder did as much to change the world from 1983 to 2006 as it did to record it. And though the 1984 JVC VideoMovie wasn’t the first model on the market, it became iconic when Marty McFly lugged it around in 1985’s Back to the Future. The ruby red model was the first to integrate the tapedeck into the camera. (Previously, home videographers had to wear a purse-like peripheral that housed the cassette.) Eventually, camcorders were displaced by flash memory-packing Flip Video cameras and, later, smartphones. But their impact will live forever, like the movies they captured.
Motorola Bravo Pager
Long before cellphones became commonplace, beepers were the way to stay in touch on the go. Early pagers allowed users to send codes to one another, like 411 for “what’s going on” or 911 to indicate an emergency (for obvious reasons). Message recipients would respond by calling the sender via telephone. The Bravo Flex, introduced in 1986, became the best-selling pager in the world, according to Motorola, giving many people their first taste of mobile communication. It could store up to five messages that were 24 characters in length. By the early 1990s, having a pager became a status symbol, paving the way for more advanced communication devices like the two-way pager, the cellphone, and eventually the smartphone.
IBM Selectric Typewriter
Turning the plodding, jam-prone mechanical typewriter into a rapid-fire bolt of workplace ingenuity, this Mad Men-era machine worked at the “speed of thought” and marked the beginning of the computer age. The 1961 Selectric model began by introducing changeable typefaces through the typewriter’s iconic, interchangeable, golf-ball-shaped print head. Then in 1964, a magnetic tape model gave the typewriter the ability to store data, arguably making it the world’s first word processor. So in 1965, when the IBM System/360 mainframe rolled out, it only made sense that the Selectric’s keyboard served as the computer’s primary input device.
Nintendo Game Boy
It’s a wonder we didn’t destroy our eyes gaming on the Game Boy’s tiny 2.6-inch olive green screen, considering how many Nintendo sold (over 200 million when you include the souped-up subsequent Game Boy Advance.) A chunky, somewhat dismal looking off-white object with garish cerise-colored buttons, Nintendo’s 1989 handheld invented the modern mobile game. Its modest power and anemic screen forced developers to distill the essence of genres carried over from consoles. The result: A paradigm shift in mobile game design that’s influenced everything from competing devoted handhelds to Apple’s iPhone.
Nintendo Entertainment System
Nintendo’s debut front-loading, rain-gray console showed up just in time to save the games industry from its excesses, arriving a few years after a crash that capsized many of the field’s biggest players. The NES was to video gaming what The Beatles were to rock and roll, singlehandedly resuscitating the market after it launched in 1983. The NES heralded Japan’s dominance of the industry, establishing indelible interface and game design ideas so archetypal you can find their DNA in every home console hence.
US Robotics Sportster 56K Modem
Beep boop bop beep. Eeeeeeerrrrrrroooooooahhhh ba dong ba dong ba dong psssssssssssh. In the days before broadband, that was the sound the Internet made. Dial-up modems, like the US Robotics Sportster, were many families’ first gateway to the Web. Their use peaked around 2001, as faster alternatives that carried data over cable lines arrived. But millions of households still have an active dial-up connection. Why? They’re cheaper and accessible to the millions of Americans who still lack broadband access.
Its blocky 8-bit graphics looked nothing like the lavish, rousing illustrations on its game jackets, but the black-and-faux-wood Atari 2600 game console was the first gaming box to stir the imaginations of millions. It brought the arcade experience home for $199 [≈ Low-end bicycle] (about $800 adjusted for inflation), including a pair of iconic digital joysticks and games with computer-controlled opponents–a home console first. It sold poorly in the months after its launch in September 1977, but when games like Space Invaders and Pac-Man arrived a few years later, sales shot into the millions, positioning Atari at the vanguard of the incipient video gaming revolution.
Philips N1500 VCR
Though it took a long, winding road to mass market success, the videocassette recorder, or VCR, got its start in 1972 with Philips’ release of the N1500. Predating the BetaMax versus VHS format war, the N1500 recorded television onto square cassettes, unlike the VCRs that would achieve mass market success in the 1980s. But featuring a tuner and timer, Philips device was the first to let television junkies record and save their favorite programs for later. But that kind of convenience didn’t come cheap. Originally selling in the U.K. for around £440, it would cost more than $6,500 ≈ Typical week-long trip for two to Hawaii
“>[≈ Typical household annual food spending, 2009] today. That’s the equivalent of 185 Google Chromecasts.
Canon Pocketronic Calculator
All business? Hardly. If you trace the path of technology far enough, iconic adding machines like this 1970 classic blazed the trail for the smartphones we’re packing today. Selling for $345 at its launch (a cool $2,165 today), this calculator was built around three circuits that let it add, subtract, multiply, and divide. Thirteen rechargeable battery cells were crammed into the casing to power the calculations, with results spat out onto thermal paper. After the Pocketronic’s launch, circuitry quickly miniaturized and prices shrank to match. Within five years, comparable devices cost just $20, and the first shots were fired in tech’s pricing wars.
A few years after a 2002 episode of Sex and the City revealed the electric neck massager’s cultish adoption as a vibrator, Hitachi dropped its brand from the device. But only in name: the Magic Wand—in service since the late-1960s—likely remains the best-known product stateside made by the $33.5 billion ≈ Harvard University endowment in 2011
≈ China’s 2009 investment in renewable energy
“>[≈ cost of 1993 Midwest flooding] Japanese company. (Hitachi makes everything from aircraft engines to defense equipment, but perhaps nothing as personally stimulating.) Though sex therapists and fans have extolled the Wand’s virtues by analogizing it to cars (the Cadillac, the Rolls Royce), it more closely resembles a microphone, with a white plastic shaft—the wand—and a vibrating head—presumably, the magic.
There were MP3 players before the iPod, sure, but it was Apple’s blockbuster device that convinced music fans to upgrade from their CD players en masse. The iPod simultaneously made piracy more appealing, by letting people carry their thousand-song libraries in their pockets, while also providing a lifeline to the flailing music industry with the iTunes Store, which eventually became the world’s biggest music retailer. The iPod’s importance extends far beyond music. It was an entire generation’s introduction to Apple’s easy-to-use products and slick marketing. These people would go on to buy MacBooks, iPhones and iPads in droves, helping to make Apple the most valuable technology company in the world.
Kodak Brownie Camera
Marketed toward children, carried by soldiers, and affordable to everyone, this small, brown leatherette and cardboard camera introduced the term “snapshot” through its ease of use and low cost. Priced at just $1 (with film that was similarly inexpensive) when it was introduced in February 1900, the Brownie took cameras off tripods and put them into everyday use. For Kodak, the low-cost shooter was the hook that allowed the company to reel in money through film sales. And for the rest of the world, it helped captured countless moments and shape civilization’s relationship to images.
Regency TR-1 Transistor Radio
The Regency’s pocket radio was the first consumer gadget powered by transistors, ushering in an age of high-tech miniaturization. A post-WWII innovation developed by Texas Instruments (which had been making devices for the Navy) and Industrial Development Engineering Associates (which previously put out television antennas for Sears), the $49.95, 3-by-5-inch, battery-powered portable was built on technology developed by Bell Labs. From the transistors that amplified the radio signal to the use of printed circuit boards that connected the components to the eye-catching design, many factors conspired to make the TR-1 a holiday must-buy after its November 1954 launch. And as revolutionary as all this tech was, it only scratches the surface of how the Regency — by ushering in truly portable communications — changed the world overnight.
Victrola Record Player
Though the phonograph was invented in 1877, it was the Victor Talking Machine Company’s Victrola that first made audio players a staple in most people’s homes. The device’s amplifying horn was hidden inside a wooden cabinet, giving it the sleek look of a sophisticated piece of furniture. Records by classical musicians and opera singers were popular purchases for the device. Eventually, the Victor Talking Machine Company would be bought by RCA, which would go on to become a radio and television giant.
IBM Model 5150
What would the computer market look like today without the IBM PC? Sure, the world had personal computers before the 5150 was introduced in 1981. But IBM’s sales pitch—bringing Big Blue’s corporate computing prowess into the home—helped make this a wildly successful product. Even more influential than the 5150 itself was Big Blue’s decision to license its PC operating system, DOS, to other manufacturers. That led to the birth of “IBM Compatibles,” the forerunner to almost all non-Apple PCs out there today.
Sony’s Walkman was the first music player to combine portability, simplicity and affordability. While vinyl records were still the most popular music format, the Walkman—originally the “Sound-About” in the United States—played much smaller cassettes and was small enough to fit in a purse or pocket. It ushered in the phenomena of private space in public created by the isolating effect of headphones. It ran on AA batteries, allowing it to travel far from power outlets. Sony eventually sold more than 200 million of the devices, which paved the way for the CD player and the iPod.
“Will Big Blue dominate the entire computer industry? The entire information age? Was George Orwell right about 1984?” That’s how Steve Jobs introduced the ad heralding the arrival of the Macintosh. With its graphical user interface, easy-to-use mouse and overall friendly appearance, the Macintosh was Apple’s best hope to take on IBM. High costs and Microsoft’s successful Windows software conspired to keep the Mac a perennial runner-up. But it forever set the standard for the way human beings interact with computers.
Renowned journalist Edward R. Murrow famously described television as “nothing but wires and lights in a box.” Of all such boxes, Sony’s Trinitron—launched in 1968 as color TV sales were finally taking off—stands at the fore of memorable sets, in part for its novel way of merging what to that point had been three separate electron guns. The Trinitron was the first TV receiver to win a vaunted Emmy award, and over the next quarter century, went on to sell over 100 million units worldwide.
Apple was the first company to put a truly powerful computer in the pockets of millions when it launched the iPhone in 2007. Smartphones had technically existed for years, but none came together as accessibly and beautifully as the iPhone. Apple’s device ushered in a new era of flat, touchscreen phones with buttons that appeared on screen as you needed them, replacing the chunkier phones with slide-out keyboards and static buttons. What really made the iPhone so remarkable, however, was its software and mobile app store, introduced later. The iPhone popularized the mobile app, forever changing how we communicate, play games, shop, work, and complete many everyday tasks.
The iPhone is a family of very successful products. But, more than that, it fundamentally changed our relationship to computing and information—a change likely to have repercussions for decades to come.
The messaging apps you likely use each day, like Apple’s iMessage and Facebook Messenger, have changed dramatically over the past few months.
These apps, primarily designed for simple conversation, are gradually evolving into platforms for more complex messaging and outside services. The shift can be compared to the move from mobile webpages to apps that took place once smartphones like the iPhone rose in popularity nearly a decade ago.
Google’s new messaging app Allo, for example, integrates the company’s search prowess directly into text conversations. Apple recently launched an entire store just for apps meant to be used within its messaging app, iMessage. And Facebook earlier this year invited companies to design their own chat bots for its Messenger app, which help you shop or book travel plans.
Apple, Google, and Facebook’s messaging apps serve similar purposes, but in different ways. Here’s a closer look at how they differ.
Allo’s biggest asset is its integration with Google Assistant, the company’s conversational new virtual aid that can answer questions and make suggestions.
Allo offers two ways to interact with Google Assistant. In a messaging thread, typing the trigger phrase “@google” will tell the assistant to pay attention to the next string of text you type so that it can answer your query. When making plans with a friend, you might type something like, “@google Show me movie times near me?” to display upcoming showings. You can also chat with Google Assistant one-on-one to ask it questions, set alarms, tell jokes, find news, and remember information like hotel room numbers, among other things.
At this point, Google Assistant adds some convenience to texting by making it easier to retrieve information without having to juggle multiple apps. But for now, it’s only helpful for basic tasks. For finding more complicated answers — like public transportation schedules — you’re still better off using a dedicated search app or web browser.
A crucial difference between Allo and the messaging apps offered by Apple and Facebook is that it doesn’t yet offer third-party apps, although Google is considering doing so in the future. With Allo, you can hunt for nearby restaurants and browse movie times without leaving a text conversation, but you can’t book a table or buy tickets for now.
While many texting apps and keyboards can suggest words as you type, Allo goes a step farther by offering up full replies based on the message you’ve just received. If a sibling sends you a photo of the family dog, Allo might suggest that you say something like “Aww!” or “How cute!” in response. This artificial intelligence-powered feature is part of what makes Allo different than iMessage or Facebook Messenger. These suggestions are on point and natural-sounding for the most part, but I found that in most instances I preferred to type out my own responses unless I was in a rush.
Stickers and expression are also an important part of the Allo experience. There are currently around 25 sticker packs available to download in Allo, which is an especially slim selection compared to the 6,000 sticker collections Facebook Messenger offers. Apple hasn’t said how many stickers are currently available for iMessage, but there are dozens upon dozens in the App Store already. These range from recognizable brand-name characters like Mickey Mouse and Mario to cute animals. The stickers in Allo, comparatively, are made by independent artists and studios.
Allo also has an Incognito Mode, which, as the name implies, is meant to offer more privacy for sensitive conversations. With Incognito Mode enabled, all chats are encrypted end-to-end. You can also choose to make your messages disappear after a certain amount of time has passed. This is similar to the Secret Conversations feature available in Facebook Messenger’s mobile app.
However, many reviewers have criticized Google for not activating this functionality by default, as Apple does with iMessage. Google also stores your Allo conversation history, even though it said it wouldn’t look at your messages when it initially unveiled the app, as The Verge noted. (Google says it does this in order to improve its service, but the company’s advertising-based business model is built around knowing as much about its users as possible.)
Unlike Messenger and iMessage, Allo is only available on mobile, for both iOS and Android. This means you can’t continue your chats on your computer while at work or get notifications on your desktop or laptop like you can with Apple and Facebook’s respective apps.
The new version of iMessage, which recently launched with iOS 10, includes an App Store filled with apps just for Apple’s messaging app. You could, for example, download The Weather Channel’s app for iMessage to look up the forecast and share it with a friend without switching between apps. Or you might have a few friends vote on which restaurant the group should choose for dinner that night through OpenTable.
Apple’s approach to messaging differs from those of Google and Facebook in that it doesn’t focus on the “conversational interface.” This idea has been front and center in both Facebook and Google’s respective apps. Part of the appeal behind Allo, for example, is that you can ask Google to answer questions or retrieve information for you in the same way you would type a message to a friend. Similarly, thousands of businesses have launched chatbots for Facebook Messenger with the goal of making it easier to use their services through casual communication. But using apps in iMessage largely feels the same as interacting with other apps on your phone, rather than chatting with a virtual assistant or automated bot. You can choose to open an app within the text field of your message or expand it to run in full screen mode.
iMessage has changed in other ways, too. In addition to the new stickers, Apple has added visual effects that Facebook and Google’s apps lack. Some examples include: The ability to send handwritten notes by holding the phone in landscape mode, tapping a word or phrase to replace it with an emoji, and sending a virtual heartbeat to recipient.
Another feature unique to iMessage is the ability to send full screen animations with a text, like a barrage of fireworks in the backdrop of a message that says “Congratulations.” iMessage also allows users to send blurred text or photos that unscramble when the recipient swipes over the message. With the new iMessage, it’s possible to make text bubbles larger or smaller, (Allo offers a similar effect), and tap on a specific in a message within a thread to ‘react’ to it, like you would a Facebook status. Plus, iMessage users can now search for animated GIFs and images with the iPhone’s keyboard by default.
Apple’s service is only available on Apple products, including iPhones, iPads, Mac computers, and iPod Touch devices.
Facebook began integrating third-party services into its chat app before Apple and Google, first introducing Messenger as a Platform in 2015. Facebook took this a step further in April, inviting app makers to create chatbots for its messaging app. There are currently more than 30,000 bots on Facebook Messenger, allowing users to shop, get weather forecasts, and read the news within the app.
When done well, using bots in Messenger almost feels like having personal assistants for specific tasks. The Whole Foods bot, for example, serves up recipe ideas. Shopping app Spring’s bot, meanwhile, will ask you what you’re shopping for and pull up relevant items. The experience is different with each bot. Some will proactively ask you what need help with, while others field questions or send news updates. What each bot does is largely in the hands of their developers rather than Facebook, which is why some bots are more responsive and engaging than others. By contrast, the Google Assistant experience is consistent since Google is in full control.
In addition to chatbots, Facebook also lets third-party apps plug into Messenger. These are different than chatbots in that they’re not conversational, instead working more like iMessage apps. You can, for instance, request an Uber or Lyft when chatting with a friend or send money through Facebook’s payment service without leaving your conversation. Some of these options appear in your in the tool bar above the text field in Messenger, while a larger selection is accessible in the More section. Many of the app integrations currently available for Messenger include different types of keyboards, games, quizzes, and photo apps.
Other than its massive sticker library and selection of third party keyboards, Facebook doesn’t offer many different tools for expression. You can’t, for example, add full-screen animations to a message or tap a word to replace it with an emoji the way you can with iMessage. It did, however, recently gain the ability to start a live video in a conversation and embed polls in group chats.
Facebook Messenger is available for iOS and Android and can also be used on the desktop.
Ultimately, most people will probably opt for the messaging platform that’s most convenient for them. Most often, that’s the app that most of their friends and family members are currently using. This is where Apple and Facebook have a major advantage over Allo. iMessage is baked into every iPhone by default, while Facebook’s Messenger app is among the largest messaging services in the world, boasting 1 billion users. With Allo, Google will have to convince users to download a new app they likely haven’t heard of.
Still, there are reasons to like (or dislike) each app. The ability to search for GIFs and stickers alone is a major step forward for iMessage, which has lagged behind apps like Facebook Messenger in this respect until now. The overall app experience in iMessage, from discovering new apps to actually using them, feels very much like installing regular apps on your iPhone, which Apple fans will likely appreciate.
Messenger, on the other hand, appears to be focused on building the conversational user interface by pushing developers to create chatbots for its platform. It’s still early days for these bots, and the vast majority of them still have yet to prove their worth. Regardless, it’s clear Facebook is focused on messaging, as the app has seen several significant changes over the past year alone. For now, the app’s ease of use and vast selection of stickers remain its biggest strengths.
Allo has potential, but for now it feels more like a testbed for Google Assistant more than anything else. The idea of having a virtual assistant present in chats to help you make plans with friends is helpful and appealing, but it does present some privacy concerns. For now, the lack of third party app integration and desktop compatibility puts Allo behind Messenger and iMessage, although it will be interesting to see how Google Assistant improves over time.
The banking industry’s structure is moving to industry stacks, reflecting a shift from competition among vertically integrated companies to horizontal competition at each layer of the banking business.
Digital technologies are reshaping the banking industry at an unprecedented rate, generating waves of fresh opportunity and potential peril for traditional banks. Digital has increased customers’ expectations for greater efficiency, quality, and speed, and it has opened the door to new competitors and disruption. (See Global Retail Banking 2016: Banking on Digital Simplicity, BCG report, May 2016.)
In other industries, prominent companies, including Google and Apple, are emerging as serious competitors through digital innovation. And a rapidly growing number of smaller fintech digital platforms—such as alternative-payment provider Earthport and mobile bank Moven—are winning customers with new digitally enabled products and services.
The traditional value chains of banking incumbents show signs of fragmenting. New technologies, such as blockchain, are evolving as potentially fundamental elements of the emerging new industry structure that we call industry stacks.
The Shift from Value Chains to Industry Stacks
The emergence of industry stacks represents a shift away from vertically integrated companies competing head-to-head across the entire value chain and toward a horizontally layered industry architecture. (See “Borges’ Map: Navigating a World of Digital Disruption,” BCG article, April 2015.) The winning organizations in the industry stacks structure will be those that adapt their business models to compete and prevail in specific layers of a stack.
Remember when IBM mainframes did the heavy lifting of global corporate computing? The computer industry began shifting to a stacked business architecture in the early 1980s. The arrival of the PC and the rapid distribution of increasingly powerful and inexpensive personal software dissolved links in the industry’s vertical integration and introduced a new balance of power. Today, those mainframes and supercomputers have largely been superseded in business applications by cloud computing and storage, as well as by racks of networked modular PCs running open-source Linux.
Stacked business architectures result in incumbents either taking on new roles—witness IBM’s evolution to a largely services and advisory company—or exiting the business entirely as their industry consolidates. Will digital technology threaten leading roles in banking, as it has done in many other industries, including computing, telecommunications, media, retail sales, and travel? We believe the answer is yes. In fact, a fundamental change in the structure of the industry has already begun. That conclusion is evident in the shifting dynamics of banking and in the drivers of change, as well as the new structures, that can be seen in other industries that are further along the digital disruption path.
The Vanishing Advantages of Vertical Integration
Many industries, banking included, have been characterized by oligopolistic competition among large, vertically integrated companies. Until now, the market dominance of those companies has been secured by two advantages of size: low transaction costs and moderate economies of scale. Transaction costs are incurred when interfacing with other firms and dealing with information asymmetry. They can be reduced through vertical integration. Economies of scale have been typically moderate because the value chain includes a mix of fixed and variable costs as well as a blend of activities that are more or less sensitive to scale. The net effect has been to confer some benefit to market share and to drive industries toward oligopolistic, but not monopolistic, structures.
Changes in technology, however, are undermining these two advantages. By broadening access to information and advanced analytics, digital and information technologies are eliminating asymmetries in the use of large amounts of sophisticated data while slashing communications costs. Smaller companies and digitally empowered consumers now have access to market information that previously was monopolized by large companies. At the same time, certain infrastructure activities—such as cloud computing and the curation of the cloud’s immense databases—are revolutionizing economies of scale.
As the cost of market interaction plummets, the dismantling of vertically integrated value chains accelerates. And as value chains are reconfigured, the various elements can consolidate or fragment on the basis of their specific economies of scale. The result is a move toward the industry stacks structure. (See Exhibit 1.)
The computer industry clearly illustrates the shift from value chains to stacks. During a 20-year period, it evolved from a vertically integrated market dominated by IBM to a horizontally layered one. Some layers stayed concentrated—Intel remains the leader in processing chips and central processing units, and Microsoft still prevails in operating-system software. Other stack layers, including application development and hardware manufacturing, continued to fragment.
The ramifications of such an evolution for the banking industry are significant. Until now, winning has required mastering the whole value chain from end to end, and doing so better than your competitors. An advantage in one part of the value chain could support selling the whole value chain of services, thus compensating for disadvantages elsewhere.
Fighting Battles in Each Layer of the Stack
In stack-based competition, players have to fight separate battles in each layer of the stack. Competitive advantage requires a company to be flexible enough to win in diverse and changing markets while collaborating with winners in layers in which it doesn’t dominate. Vertically integrated incumbents will now confront different competitors in each arena. They will need to excel at all layers of the stack or eventually be forced to limit their focus to the layers in which they already have a competitive advantage.
Banking already shows signs of moving toward a stacks architecture. (See Exhibit 2.) The bottom layer of the stacks model is infrastructure, which benefits from scale. It includes platforms that incorporate hosting infrastructure; platform enablers, such as core banking systems; and other processing and information services based on data, such as clearing.
The second layer up comprises banking applications and services. These include basic accounts for money and securities as well as transaction, lending, and investment products.
Above that sits the customer interface layer—which includes not only traditional channels, such as branches, but also brokers, points of sale, and ecosystems—through which products and services become accessible to users.
At the very top are the communities of users, including consumers and businesses. Here, users are quickly becoming producers and information sources. For example, in financial services, investment platforms offer user-generated advice and information.
Incumbents Face Attack in Every Layer
In banking today, new industry entrants are attacking incumbents in every layer of a given stack. Players from other industries typically attack at the customer interface, offering select, high-margin products. These include giant global retail technology pioneers, such as Apple, Google, and Amazon; focused global players, such as PayPal; and telecom providers.
The degree of peril posed by these players depends on the services they offer. A new front end to traditional banking services could prove to be a major threat to banks if it allows the interloper to steal the customer’s loyalty or to substantially reduce business volumes, confining the bank’s role to commodity back-end processing. In the worst case, these outside competitors will aim to become full-service banks, though many shy away from doing so because they don’t want to be regulated.
What makes some of these companies particularly dangerous is that they approach banking with a different financial logic. Banks focus on earning money from their products and services, but players from other industries are more interested in building the value of their ecosystems and gaining access to rich data. To enhance that value, they are willing to disrupt business by giving products away for free, as Apple did with maps and navigation systems.
Fintechs, which have grown rapidly in number and in level of investor funding, similarly aim to take control of the customer relationship. They enter specific, attractive banking segments with focused products and services, aiming to disrupt banks through platforms, such as peer-to-peer lending and investment services. Some fintechs address customers’ new or unmet needs through innovative business models, such as the online money transfer service TransferWise. Others upstage the existing services of traditional banks with improved offerings, such as Mint, Intuit’s online personal-money-management service.
Fintechs that insert themselves into customer relationships or limit direct access to clients pose a particular challenge to banks, jeopardizing margins if not volumes. They threaten to disrupt banks’ ability to provide a full-service offering by going after the most attractive pockets of revenue and profitability, such as payments or investments. This leaves banks with lower-margin, unattractive products and underused platforms and networks.
Specialized service providers are active at lower layers of the stack, mainly in the infrastructure layer but also in the applications and services layer. Some companies—such as IBM, Experian, and SAP—offer IT services, data management, and risk management. Others, such as Wirecard, provide private-label platforms.
Most radical of all, perhaps, are the companies that use blockchain technology, which harnesses large federations of computers (that may or may not be owned by banks) to validate transactions through a shared protocol.
These institutions can exploit scale and innovation beyond what a single bank can achieve. Some take advantage of the increasing volume and availability of data, thus eroding banks’ information and analytics advantage in the products and services layer. These players do not pose a direct challenge to banks but rather see them as customers. Nevertheless, they threaten banks by facilitating disruption as they provide services to attackers and lower the barriers of entry for players that need only to master the top layer of the stack.
Incumbent banks will find it increasingly difficult to prevail. A strong position in accounts, for example, can no longer be relied upon to sell a bank’s own service solutions. Further, as new entrants continue to compete for the customer interface, banks will lose control of the channels that are driving volumes in the lower layers of the stack. Regulators, however, might protect the current industry structure and slow down the emergence of a stack structure if they focus on regulating services rather than certain players.
At the same time, the innovation driven by fintechs provides an opportunity for incumbents. Banks can innovate at an unprecedented speed if they embrace new market solutions, such as robo-advice.
These changes to the banking industry’s structure are in their early stages, and further shifts toward the stacks structure are likely. A greater proportion of banks’ revenues will therefore become vulnerable to attack by new entrants at various layers.
Four Viable Business Models Emerge
In BCG’s article “Borges’ Map,” Philip Evans and Patrick Forth argue that business architecture has itself become a strategic variable. Technology may be used to optimize and create competitive advantage within a business model. But real success stems from an organization’s ability to reinvent its business model or adapt to the opportunities provided by both technology and the ubiquitous availability of digitized information that can be generated, mined, analyzed, and used at low cost.
In this world, stacked business architecture will be the dominant structure, and four distinct, viable business models are emerging within it: traditional oligopolist, infrastructure organization, platform, and user community.
What will this mean for the future of the banking industry?
Traditional Oligopolist. Companies following this business model have a competitive advantage in environments where uncertainty is high but not incalculable and where economies of scale are significant but not overwhelming. Their advantage stems from continuous improvement in core products and processes as well as from investments in sustaining the advantages of scale. The successful traditional oligopolists will continue to control a large part of the value chain.
Current incumbent banks, whose number one priority is to keep their offerings relevant for customers, are naturally positioned for this space. When they lose access to the customer, these banks will have to become the new winners’ best partners at the customer interface to avoid losing platform scale. Partnering with future winners will also allow them to gain share on volumes. Margins will come under pressure as products are commoditized, and some products will even become unsustainable for the majority of integrated banks that fail to reach the scale required.
Overall, the model of traditional oligopolists will become less relevant.
Infrastructure Organization. This type of company will be found at the bottom of the stack, where scale matters most and uncertainty is lowest. Scale and efficiency are key here, and IT providers, utilities, and global product players, such as credit card companies, will continue to prevail. Several products currently manufactured by banks will migrate into this space, especially in the capital markets business; consider foreign exchange trading, for example. Infrastructure organizations will therefore both partner and compete with traditional oligopolists.
Platform. Organizations using this business model provide services to communities and allow them to scale as a result of the network effect of serving a large number of users. This creates a winner-take-all environment with monopolistic structures. The value of these platforms must be sustained by continuous innovation and reinvention. Unlike traditional monopolies, which are protected by barriers to entry created by the immense investments in infrastructure—such as cables, pipelines, or railroad tracks—that are needed to form a traditional network, these new networks are generated by users’ decisions. And as users’ views and needs evolve, the new fragile monopolies can lose scale as quickly as they gain it.
Some traditional banks, including BBVA and Citibank, are exploring the platform approach—for example by opening their applications programming to benefit from external innovation. As the value of physical distribution networks erodes, more banks might want to explore options to create new digital platforms. With access to customer data, an understanding of customers’ needs, and the sheer scale of their customer base, banks have the assets that are essential for building a platform.
The bank as an app store in the center of an ecosystem might become a business model for the future.
User Community. Consumers, professionals, and small entrepreneurs will gather in communities at the top layer of the stack, consuming services and products offered by companies in the layers below. They flourish in environments that have high uncertainty and weak economies of scale. Members of these communities innovate to build solutions that are better than the ones provided by companies in the other layers. They build on platforms, and their costs of failure are low; the main investment is the creator’s time—and the upside is large when they hit it right. Innovative solutions can scale quickly and create global businesses within months.
This potential to scale quickly in the user community space is what attracts venture capital to fintechs and other startups. Though some banks are building disruptive business models independently—creating venture capital funds to fuel external innovation that they can internalize or using hackathons to create new digital solutions for their customers—this space is largely untapped by banks today.
The detailed structure of future banking is, of course, unclear. As the stacks architecture continues to evolve, however, banks will need to know which model to employ given their circumstances and then excel in its execution.
What Banks Must Do to Succeed
Some say that banks will be marginalized and become mere product providers. Others argue that banks should appeal to regulators for protection from the economics of disruption. Still others believe that determined banks will find paths to evolve and survive by leveraging their core assets, such as their customer base, relatively large investment budgets, and generally well-educated staff.
We believe that the organizations that embrace the opportunities of technology in the industry stacks structure will emerge the strongest. Banks that aim to be among the winners must take three actions:
Build an understanding of their market’s dynamics and, more important, identify current and future competitors in each layer of the stack.
Generate options for their future market position using the opportunities provided by technology for both digitizing the core and launching disruptive solutions.
Above all, develop the ability to adapt to an uncertain and shifting environment.
Ultimately, banks will need to face the brutal facts about where in the stack they have a sustainable competitive advantage and are able to compete profitably. It may be necessary to focus activities more narrowly in some layers while investing heavily to innovate and broaden scope in other areas.
Because the precise outcome cannot be predicted, becoming more adaptive is the key challenge. Banks operate in an environment in which aversion to risk is part of the culture on all levels and where decision making is complex and slow. Those institutions will now have to be able to manage both continuous incremental improvements in their core businesses, where they still mainly compete against one another, and innovations in adjacent and new business areas, where they will compete against new, agile competitors.
Banks must be able to operate with a more diversified mix of channels and to supplement captive channels with other solutions. Technology will play the main role rather than just support it, and data management will become a key source of competitive advantage.
This will require a fundamental change in the way banks operate, starting with a significantly tighter focus on customers. Banks will need to take the following steps:
Become less hierarchical and siloed and instead allow more distributed leadership and empowerment of teaming for customer-relevant solutions.
Establish clear processes for innovation with KPIs and set up governance structures that differ distinctively from those of the traditional mature businesses that banks are used to running.
Develop modular organizations, in which services from bottom layers are easily available to all services at the top.
Create a new people strategy to attract and cultivate digitally savvy entrepreneurial talent.
Foster a culture of excellence in everything they do; this is critical for banks aspiring to remain relevant in all layers of the stack.
Times of uncertainty are times of opportunity for entrepreneurs. Now is the moment for banks to rebuild entrepreneurship while retaining their abilities to manage efficiency and incremental improvement.
Yet disruption has not defined the future of banking. Organizations that understand and wield the digital opportunities to drive change, rather than be driven by its perils, hold the future in their hands. Taking a small number of decisive management actions now can lay the foundation for success.