Do we need to kill “big data”?

 Design Thinking, innovation, Strategy, Web 2.0  No Responses »
Jan 182013
 

A recent article on Techcrunch made the argument that the term “big data” should be abandoned, on the basis that it has fallen into generic usage and, in any event, no longer represented how organisations are thinking about their data.

Organisations aren’t interested in amassing lots of data, the author – Leena Rao – opined. Rather, they want to derive insights from big data.

She has a good point.

There is a real risk that the "big data" movement will soon experience the same backlash that befell the CRM movement in the 90s.

The key problem is that too many people think of "big data" in terms of a technology purchase. The mind set is: "We will choose a big data vendor, install their solution and then – automagically – we will reap significant business benefit and advantage".

I always prefer to describe CRM as a "philosophy". Organisations need to embrace the key tenets of customer relationship management, which in turn requires making changes at multiple levels – technology (of course), employee training, internal policies and procedures, customer communications and, importantly, culture.

That is, to successfully embrace CRM, an organisation must ensure its day-to-day business operations and company culture fully reflect the tenets of CRM.

As such, it is a philosophy – a way of thinking/acting – as much as it is a technology solution.
Today, many organisational stakeholders are falling into the same "buy the technology, secure the prize" trap when it comes to big data.

Big data is actually worse, because it requires multiple kinds of technology purchases: solutions to handle data ingestion, validation, storage, management, aggregation, chunking, abstraction, querying, hypothesis testing, access controls, reporting, visualisation etc.

It also requires significantly wider changes to business practices, policies and procedures – often involving multiple external partners within a supply chain – to achieve even the slightest outcome.

Accelerating shift from marketing to product/service re-design

 Design Thinking, innovation, Media, Strategy, Web 2.0  1 Response »
Sep 192012
 

An interesting new study, conducted by Duke University on behalf of the American Marketing Association, has been published, and is well worth reading.

It provides a number of insights into factors influencing market development, growth strategies, fluctuations in marketing budgets and growth in social media marketing expenditure.

But the table below provides a real eye-opener for those unconvinced of the emerging influence of design thinking, and its related discipline, service design.

Key takeaway: Traditional advertising expenditure (that is, offline advertising) is expected to fall by 137.5%. Online spend will also fall by 10.2%.

What will Chief Marketing Officers be directing their marketing budgets to instead?

Designing and implementing better customer experiences (+26.8%) and, more tellingly, designing and developing new services (+52.4%).

Confessions of an adaptive strategist

 Leadership, Strategy  1 Response »
Jan 242012
 

Welcome to 2012.

It’s hard for me to believe it, but this blog has lain idle since January 2009. A couple of factors contributed to this *ahem* sojourn.

First, my daughter (Miss Sophie) entered my life and has managed to account for pretty much every spare minute of it since.

Second, there was a trajectory change career-wise. After almost 15 years of running my own management consulting business, I took a position as Head of Strategy at a technology consulting firm, tasked with designing and launching a new-to-market strategic advisory service offering.

What followed was an enjoyably challenging and successful two years, culminating in a lateral move to an even larger – this time global – technology consulting firm (ThoughtWorks, my current employer).

I’ve been with ThoughtWorks for a little over a year now. It is an interesting firm, with an interesting pedigree (more on that in a later post).

As a living, breathing embodiment of the Agile Manifesto and aligned software development philosophy, ThoughtWorks has presented me with my first true professional challenge in a long time: re-casting how I practice the management science and disciplines of strategy formulation and execution.

Few seasoned strategy practitioners would question that the field of strategy (and it’s cousin, strategic planning) has changed. We recognise that markets are more dynamic, competition is more intense, and the fundamental output of organisations has shifted from the predictable production of tangible things (products) to the less predictable delivery of intangibles (knowledge, services and experiences).

There are fewer ‘knowns’ and significantly more ‘unknowns’ (even though some might fall into the category of ‘known unknowns’).

Yet the development of strategy for many organisations remains a linear, heavily-structured, top-down process, often far-removed from the day-to-day realities of business.

My day-to-day focus at ThoughtWorks remains strategy formulation and execution. I help organisations re-imagine what is possible in their industry, and to then re-design their business model and product/service portfolio to meet the needs, wants and preferences of their customers in new ways that create unrivalled value propositions.

However, both directly and indirectly, my primary challenge is working with leaders and senior stakeholders to overcome their fear of letting go – of moving past the structured, controlled but value-destroying process of strategy development (and strategic planning) as it is practiced in most organisations today, and embracing a more adaptive (agile) approach that is less prescriptive, more inclusive of all levels of the organisation, and better able to respond to emerging market opportunities and challenges.

I look forward to sharing what I have learnt – and am learning – as I grapple with these new challenges.

Are Poor Metrics Holding the Online Industry Back?

 Interactive, Media, Strategy, Web 2.0  3 Responses »
Oct 292008
 

A recent survey by McKinsey highlights the growing challenge faced by marketers in deciding how to allocate their media spending:

The rapid growth of online advertising hides a serious challenge: the digital world has developed faster than the tools needed to measure it…A June 2008 McKinsey digital-advertising survey of 340 senior marketing executives around the world shows the breadth of the gap between what’s needed and what’s available. Hobbled by nascent technologies, inconsistent metrics, and a reliance on outdated media models, marketers are failing to tap the digital world’s full power. Unless this problem is addressed, the inability to make accurate measurements of digital advertising’s effectiveness across channels and consumer touch points will continue to promote the misallocation of media budgets and to impede the industry’s growth.

There are three problem areas:

1. Media Planning – New tools are needed to help media planners compare the impact of on- and offline efforts.

2. Conversion measurement – Greater insight is required into how online messaging converts target consumers into making online and offline purchases.

3. Social optimisation – Targeting methodologies have not yet adapted to the changing context in which individuals are consuming online content; in particular, changed context(s) within social environments and how word-of-mouth and recommendations fit within this category.

The survey found that over 50% of respondents were not happy with the current processes for media allocation and measurement. Surprisingly, only 50% of respondents indicated that they used click-through rates to determine the effectiveness of their direct-response advertising – which suggests the rest are preferring qualitative over quantitative measures. Only 30% of respondents indicated that they considered the offline impact of online advertising.

Few in the online industry would claim that the ‘measurement challenge’ has been solved, but it doesn’t seem fair to suggest that poor metrics alone is holding the industry back. Despite having access to over a decade of data on how to use the online medium effectively (either as a stand-alone channel or in conjunction with other channels), it seems that a sizeable number of marketers have failed to adapt their toolkits and processes, or invested in the requisite skills to optimise the ROI of their online spend.

 

Returning to Fundamentals – What happens when funding dries up

 Strategy  No Responses »
Oct 172008
 

It’s has been a fair while since my last post, as I’ve been grappling with some interesting strategy issues for a client project.

However, I’ve been having a few conversations with friends and colleagues about the likely impact of the recent economic crisis on the ‘Web 2.0′ scene. These conversations reminded me of a paper that strategy guru Michael Porter wrote around the time of the first dot.com bubble, which was fairly prescient then, and remains so for the current environment:

It is hard to come to any firm understanding of the impact of the Internet on business by looking at the results to date. But two broad conclusions can be drawn. First, many businesses active on the Internet are artificial businesses competing by artificial means and propped up by capital that until recently had been readily available. Second, in periods of transition such as the one we have been going through, it often appears as if there are new rules of competition. But as market forces play out, as they are now, the old rules regain their currency. The creation of true economic value once again becomes the final arbiter of business success.

(From Strategy and The Internet, Harvard Business Review, March 2001)

We will undoubtedly see considerable carnage among so-called Web 2.0 start-ups (and even some more established entities) as private equity dries out. While that will be painful for those concerned, it will – over the medium term – be good for the industry, as it will weed out businesses with poorly conceived revenue models and customer propositions, and unsustainable business models.

The next ‘re-intermediation’ business opportunity?

 entrepreneurs, innovation, Media, Strategy, Web 2.0  3 Responses »
Jul 302008
 

I recently had cause to investigate how you might use a utility/cloud computing service, like Amazon S3, to provide an efficient and modestly priced solution to serving up video-on-demand content services, as an alternative to the more traditional offerings of streaming video platform providers.

I was impressed by the level of intelligence behind not only the pricing of such services (just cheap enough so it makes more sense to outsource – Coase theorem at work), but also the dynamism reflected in the engineering of their underlying infrastructure.

Amazon, and others, provide some seriously ‘grunty’ utility/cloud infrastructure. The recent S3 outage notwithstanding, utility/cloud computing is here to stay. Its adoption by businesses is likely to be accelerated by the early successes of server virtualisation technology adoption by enterprise users, spearheaded by VMWare.

This points to an exciting new realm of opportunities for "middle men" to move this capability into the hands of consumers. Allow me to explain.

We are the last generation who will ever have to worry about launching an installation CD.

We are the last generation who will ever have to worry about disk (storage) capacity.

We are the last generation who will ever have to worry about CPU speeds.

Finally, but importantly, we are the last generation who will ever have to worry about bandwidth throughput (speed).

Imagine what you could do in a world when you’re free of these kinds of constraints.

We’re starting to see the potential indirectly, in the guise of the rapid proliferation of Facebook apps. These apps exist "out there". We don’t care where they reside. Importantly, we play no active role in their installation, configuration or management. Equally, these apps care little about the end user equipment/device or infrastructure being used to access and interact with them.

This is how software (and services-powered-by-software) will look for all users within the next decade.

The promise of utility/cloud computing infrastructure, then, is that it will finally hide the technology. And history tells us that when technology ceases being ‘technical’ – when technology shifts from the core of the experience to the periphery – immense behavioural changes follow.

Now back to the opportunity for middle men.

While utility/cloud computing infrastructure has hidden (or, at least, is starting to hide) the technology, it is still a fairly immature offering, in that – as a product offering – it is largely focused at technical users.

While it is easy to setup an Amazon S3 account, for instance, it is still quite difficult to configure and manage the services that you purchase/consume. This represents an unnecessary hurdle in the current environment, in which – thanks for ‘mashup’ services and the like – non-technical users are being increasingly encouraged to ‘develop’ software-based solutions to every day problems.

This creates a market for an intermediate layer: companies who take utility/cloud computing services and repackage them in a way that makes them accessible to non-technical users. Companies like Morph have taken a step in the right direction, but there is still plenty of scope for innovation in this new market niche.

Is ‘Born Global’ the new normal for software start-ups?

 entrepreneurs, innovation, Strategy, VC  5 Responses »
Jun 172008
 

A scan of recent activity in the Australian start-up sector suggests that, for many Australian new ventures, launch planning is rooted in a single, dominant objective: ensuring the business is “born global.” Nowhere is this mindset more apparent than among software-based start-ups, led by organisations such as Atlassian, Tangler, Freshview, and 3eep, among many.

Australian businesses have a long history of being export motivated. Nonetheless, the traditional approach to internationalisation required that companies first establish a solid local market position before commencing offshore activities. Even then, export market development tended to be a gradual process, following a series of incremental and sequential stages, with commitment decisions made according to a range of factors, including market perceptions, offshore experience, and management capacity.

What is driving the Born Global attitude?

A ‘born global’ business is one that starts international activities right from birth, entering overseas markets immediately, often multiple countries simultaneously.

What is causing new ventures to opt for such a potentially high risk strategy? This more aggressive approach to offshore market development has emerged for a number of reasons.

Chiefly, it is as a result of Australia’s size. While Australia’s economy is in good shape – it is currently valued in excess of $750 billion, was last in recession in 1991, and has averaged 3¼% growth in GDP since then – the fact remains that we are a relatively small population. We constitute less than 1/3 of 1% of global population, our economy is the 16th largest in the world, and we account for little more than 1% of global GDP.

With over 98% of global populations and global trade outside of Australia’s borders, a compelling argument exists for adopting a globalist perspective. Undoubtedly, those start-ups who choose to ‘leapfrog’ the traditional business growth cycle, and launch directly into international markets, see the world as their marketplace from the outset.

Additionally, over the past decade, we have seen significant developments in communications technologies. The rapid penetration of fixed, wireless, and mobile broadband services are not only enabling technologies for servicing a global market, but also a key driver of market demand for innovative software services.

Finally, Australia’s growing ex pat community is playing a role. Only a few decades ago it was quite rare for Australians to gain offshore work experience. Today, it is not only increasingly common; it is relatively easy for those still firmly rooted in Australia to tap into this network of experience.

Are Software Start-ups Unique?

Several other drivers peculiar to the software sector are shaping launch strategies:

  • Export market homogenisation – Since the demise of the Berlin Wall led to the broader embrace of free market ideologies, both Western and Eastern cultures have become increasingly homogenised by entertainment technologies and the activities of modern conglomerates. This market homogenisation makes for expanding global consumer segments with readily identifiable and uniform tastes, interests, and desires.
  • Operating system monocultures – While there are usually myriad OS offerings for any given hardware or device platform, the general trend is towards monocultures, where a single operating system has the dominant share (as Microsoft Windows does, for example, in corporate, home and online environments). The presence of software monocultures significantly expands the market for complementary software products while reducing development risks.
  • Open Source – The growing availability of robust Open Source software development tools and environments such as Ruby on Rails, MySQL and PHP, and the communities of interest they attract, has dramatically reduced the costs associated with launching software products capable of scaling to meet global market needs.

Two further factors can be isolated as having a disproportionate impact in fostering a globalist mindset among software entrepreneurs.

The first is lowering barriers to entry into the Australian market. Industry giants, such as Google, Yahoo!, and Microsoft, are serious competitors for any software start-up. Their existing audience reach, brand dominance, and capitalisation, together with mainstream consumers’ preference for ‘tried and tested’ companies, mean start-ups must assume offshore competitors will capture a large portion of the local market. One logical competitive response is to seek critical market mass by aggregating small pockets of customers across multiple markets.

The second is the desire by founders to position their start-ups to secure offshore investment. Australian entrepreneurs have long complained about the ‘immaturity’ of the local private equity market, pointing to the lack of money available for early-stage funding and less tolerance for risk among Australian VC firms. Attracting offshore investment is problematic, as investors prefer businesses with local market operations, the dynamics of which they are more familiar with. Positioning a start-up to enter attractive private equity markets, such as America or Europe, provides greater options for securing investment.

Microsoft’s Bid for Yahoo!

 Media, Strategy  1 Response »
Feb 032008
 

The numbers on this deal are very interesting. Like Microsoft’s acquisition of a minor stake in Facebook, most of the value created in the transaction is strategic – it has less to do with the present value of future cash flow, and more to do with making sure an asset does not fall into a competitor’s hands

There is a broad array of issues at play here:

- The No.2 + No.3 competitor joining to take on a dominant No.1 competitor

- The ‘land grab’ mentality of the current media market (a redux of the ‘eyeballs economy’ of the original dot.com bubble)

- Scale + scope economies

But leaving aside the economic + market factors, I am quite surprised no-one has noted the very (very) different cultures at the three companies.

Google is a ‘pure’ technology company – it is an engineering-led business.

Yahoo is (or was, until very recently) a media company – it is/was a media-led business.

Microsoft is a software company, with an increasing services-bent.

Viewed through this lens, it is clear why Google captured the outright lead. But a change is coming, as we all now take certain technologies for granted, which calls for a new breed of company. Yahoo! hasn’t been able to step in and fill that gap. Microsoft is certainly trying to, but it was a late convert.

Can Microsoft + Yahoo!, as a combined entity, pull it off? I think so, but it is going to require some very deft handling of cultural change. Now Bill Gates has ‘retired’, I wonder who has the wherewithal to pull it off?

OpenSocial – Taking social networking to the next level

 3rd Horizon, Strategy, Web 2.0  2 Responses »
Nov 062007
 

For those of you who have met me in person, you’d know that I have long been championing the need for a technology that would enable ‘profile portability’.

A key constraint with social networks is that they force you to choose. You must choose whether you will invest your time and efforts in Facebook, or MySpace, or LinkedIn, or Bebo or any of the myriad social networking services currently available.

Developing, maintaining and building your profile and social network can be a time intensive process (depending how committed you are). Social networking companies (and their investors) see this as a good thing, because it promotes (in their view) ‘stickiness’ and creates an artificial barrier to exit. The thinking is that the more time and effort consumers invest in creating their profile and building their network of friends and acquaintances, the less likely they are to abandon the site and move elsewhere, because they would be forced, in essence, to start from scratch.

What this thinking overlooks is that by creating a ‘walled garden’ around consumer’s social interactions, these companies actually introduce problems (pain) for the very consumers they were seeking to attract and retain.

For example, if all your friends are on Facebook, life is good. But if only some are on Facebook, while others are on Bebo, and others still on MySpace etc., then you have a very real problem – you need to maintain multiple profiles, and manage multiple ‘portfolios’ of social connections and interactions. The alternative is to elect to inhibit your interactions with those friends that use a different social networking service – not a particularly palatable choice.

Equally, if you maintain multiple profiles across different networks, then when you want to update your profile, you must repeat the process several times, or choose to actively maintain one or more profiles, while allowing the others to go ‘stale’. 

The social networking environment today is in much the same situation the mobile/cell phone industry was a decade ago – it forced consumers to make a choice.

Because there was no network interoperability, you had to choose a mobile network, and were forced to operate within that network. If your friends used the same mobile provider, life was good. But if your friends used other mobile network providers, you could not call or sms them. The end result was continuous churn, as consumers moved to the network that held that largest percentage of the people they needed to stay in contact with.

Equally, back in the bad days of ‘walled garden’ email services, consumers were forced to maintain multiple email accounts with multiple service providers (and thus multiple email contact databases in multiple email applications), to ensure that most (though usually not all) of their friends could communicate with them electronically. Having an MCI email address wasn’t enough. You also needed a Compuserve and AOL email address, as well as a UUCP email address to maintain a link to those who hadn’t migrated yet from BBS-based messaging services.

History tells us that consumers will not endure such forced choices for long. Just as phone, email and Internet service providers were forced to ‘open’ their networks, so too will social networking service providers.

Google, via OpenSocial, appears to be the first to offer a solution that will provide the level of openness consumers will surely demand.

With OpenSocial, consumers need only invest time and effort building a ‘master’ profile, and can use that profile to move between different social networks. Over time, we can expect a unified messaging and push communications process (in the same way that Instant Messaging services were forced to support interoperability).

The end result is that social networks will start competing at the edges – it will really become a ‘branding’ (social network affiliation as fashion accessory anyone???) and innovation play.

(If you accept this logic, it should come as no surprise that Kylie Minogue has launched a Kylie-branded social networking service – KylieKonnect.)

Consumers will choose as their primary social network that company whose brand elements they most identify with and, to a lesser (though still important) degree, that which continues to innovate to create services that they value.

Given the network-as-a-platform trend, most of this innovation will come in the form of 3rd party apps, so the real competition will be around which network secures the largest number of JVs/partnerships with apps developers, in the same way that games consoles developers are heavily reliant on securing a pipeline of blockbuster games from 3rd party developers to maintain the consumer appeal of their platforms.

Google has once again made a smart move. It isn’t too late for others to enter the play, though.

I doubt Google is really interested in ‘owning’ the social network platform. Social networking is an emotional experience, which is not something Google has been good at providing historically (search is a logical, task-oriented process).

Instead, providing the platform that enables profile migration and universal communications, as well as being able to capture a single view of each individuals’ “social graph” across multiple social service networks,  positions Google to extract yet another layer of data about people, their interests, needs and wants, which will serve to re-enforce Google’s dominance in search and targeted advertising.

Bubble 2.0 – Advertising Platform the Key to Online Domination

 3rd Horizon, Cash, Media, Strategy, VC, Web 2.0  No Responses »
Oct 022007
 

The Wall Street Journal Online published an interesting article last week titled Microsoft Fires Volley At Google in Ad Battle, which states in part:

Some industry executives believe the Internet today is facing the sort of turning point that the computer-operating-system sector confronted two decades ago: Whoever controls the technology platform for buying and selling online ads could hold tremendous power over the Internet industry for years to come — much as Microsoft was able to use its Windows operating system to shape the personal computer.

I believe this assertion is largely true – whoever has the dominant share of advertising distribution will be at the centre of power within the Internet industry, as they will essentially control the revenue spigot.

During the initial ‘dot com’ boom, the prevailing mindset (and, thus, business model) was ‘build your audience, and worry about monetisation later”. This mindset actually fed on itself, as many popular, free services launched in 1998-2000 were themselves predicated on the availability of free services (e.g. free web hosting, free comms, free downloads etc.). That is, sites that offered free services were built upon free services offered by others.

When, around 2001, the crunch came, funding dried up, and start-ups started trying to implement their (hastily devised) revenue strategies, the ‘free built upon free’ environment became a nasty accelerant for destruction.

Non-profitable companies attempted to implement fees for previously free services, with the result that those who used those free services had to implement fees to cover these new overheads. End consumers refused to bite, with the result that no-one in the value chain was actually able to cover their costs, and businesses collapsed left and right.

This time, of course, it is all different.

The dominant mindset is that advertising will pay for the services, so that they can be provided free to the end-customer. Recognising the value of this arrangement, consumers will (it is believed) be only too happy to interact with advertisers, and provide the necessary information to ensure advertising can be sold at a premium.

Whether this revenue model is the panacea many think it is is debatable. However, it is undoubtedly true that many emerging ventures will be heavily reliant upon advertising revenues to drive their business model. In this scenario, the owner of the dominant advertising publishing/distribution platform will control the levers that turn advertising revenues on and off – a very powerful position, not unlike the position of those wealthy merchants who sold picks and shovels during the early gold rushes. Regardless of whether you struck it rich or went broke trying, along the way the equipment merchants earned their fee.

No surprises, then, that Microsoft, Google and Yahoo! are fighting the good fight over who will be in the driver’s seat.

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