|By William Schmarzo||
|February 19, 2017 12:00 PM EST||
Business Model Transformation and What it Means to the Data Industry
I recently read an MIT Sloan Management Review article by Clayton Christensen’s recent book titled “The Hard Truth About Business Model Innovations.” While the article is full of great observations about business model transformation, the most important motivation for business model transformation is found at the end:
“..our understanding of the business model journey allows us to see that, over the long term, the greatest innovation risk a company can take is to decide not to create new businesses that decouple the company’s future from that of its current business units.”
We use the Big Data Business Model Maturity Index as a vehicle for engaging with our clients about how they can leverage data and analytics to transform their business models (see Figure 1).
Figure 1: Big Data Business Model Maturity Index
In light of the Big Data Business Model Maturity Index, the article really got me thinking about how the entire data technology industry is posed for a business model transformation. Let me explain.
Across a number of industries, we are seeing business models under attack. It may have started with the digital media industries (advertising, entertainment) but it has quickly spread into physical product and service industries such as retail, telecommunications, financial services, healthcare, education, travel, hospitality, transportation, distribution and manufacturing. Organizations within these industries are leveraging data and analytics to disrupt existing business models (and disintermediate customer relationships) as the boundaries that separate industries evaporate (see Figure 2).
Figure 2: Big Data Driving Business Model Disruption
I believe that same business model disruption (and subsequent customer disintermediation) is going to happen to the technology industry that spawned all of this transformation, and no technology industry has the opportunity to be a business model disrupter more than the data technology industry – the industry that gathers, stores, secures, provisions and analyzes the growing wealth of transactional, social, mobile, wearables, embedded, machine generated and publicly available data.
So I searched for a proxy that might provide some insights into the business model transformation of the data industry, which took me to the bottled water industry transformation.
Bottled Water Business Model Transformation
For over three decades, water was simply something that came out of the tap in your home or the water fountain. While water was essential to life, its relative financial value was very modest. Then things changed.
In 1977, Perrier launched a successful advertising campaign in the United States, launching the popularity for bottled water. Bottled water is currently the second largest beverage category by volume in the United States, behind carbonated soft drinks (CSDs). The Beverage Marketing Corporation (BMC) predicts that bottled water will surpass CSDs to become the number one beverage in America by early 2017 (see Figure 3).
Figure 3: Increasing Demand for Bottled Water (per Person consumption)
Despite having one of the best municipal tap water systems in the world, American consumers flocked to commercial bottled water for four key reasons:
- First, consumers have been bombarded with advertisements that claim that their tap water is unsafe, or that bottled water is safer, healthier, and more hip.
- Second, public drinking water fountains have become increasingly hard to find. And the ones that exist are not being adequately maintained.
- Third, people are increasingly fearful of our tap water, hearing stories about contamination, new chemicals that our treatment systems aren’t designed to remove, or occasional failures of infrastructure that isn’t being adequately maintained (see Flint, MI water disaster).
- Fourth, some people don’t like the taste of their tap water, or think they don’t.
A couple of key lessons that we can take away from the bottled water business model transformation:
- Through a business model transformation effort focused on value and not just functionality, consumers willingly pay 2000x more for bottled water than they do for basically the same functionality coming out of the tap or water fountain.
- The vendor didn’t create a new product – it changed the economic value of their product (water), through effective marketing, which spawned an industry.
Future of the Data Industry
The same phenomenon is starting to occur in the data technology industry, and the potential to change the financial valuation of data technology players could be stunning! The challenge is how do these data technology vendors turn what has historically been a commodity by-product (data) into a premium product (business outcomes)?
Organizations have traditionally treated data as a legal or compliance requirement, supporting limited management reporting requirements. Consequently organizations have treated data as a cost to be minimized. The financial valuation of data technology companies has been based upon those perceptions and relationships. The below chart from Gartner summarizes the business model transformation challenge (see Figure 4):
Data technology companies tend to sell to the part of the organization where data is a cost to be minimized and the sales processes focuses on negotiating with Procurement on price, margin, terms and conditions, instead of engaging with the part of the organization where data is a corporate asset to be exploited for business value, and discussions focus on time-to-value and de-risking projects.
It would seem that anything that the data technology companies could do to increase the perceived and actual value of data to its customers and the market could dramatically increase their financial valuation. This includes leveraging data to deliver business outcomes such as:
- Optimize key business processes,
- Uncover new monetization or revenue opportunities,
- Reduce security, regulatory and compliance risks,
- Create a more compelling customer and partner engagement, and
- Enable new business models
This would require a business transformation for technology companies in order to focus more on delivering business outcomes and less on selling technology piece parts with “some assembly required.”
Data Industry Call to Action
In much the same way that Perrier’s introduction of bottled water to the United States in 1977 led to the creation of a new industry, the data technology industry sits at a similar business transformation point. But business model innovation and transformation will not be achieved with a “business as usual” approach. As Clayton Christensen points out: “organizational interdependences developed to optimize existing business processes dooms the creation of a new business model within the existing business model.” It will require these companies to think differently about how they structure their organization, how they go to market, how they build products and how they incent their customer engagement teams in order to create value for their customers.
There is much that we can learn from other organizations that have transformational business models. Companies such as Netflix, Amazon, Uber and GE have created business models by focusing on the Customer Journey; by meeting customers “where they are and taking them where they need to be” and focusing on delivering business outcomes (or decisions in data science vernacular), not just technology piece parts.
But this needs to be done at scale; something a data technology company is uniquely qualified for, with the ability to create pre-engineered solutions and “collaborative value creation” platforms that couple hardware, software, and consulting to support the customer journey.
Data technology companies can be the pioneers in transforming their business models; however, they will not drive business model transformation by selling data as a commodity like tap water. Instead, data technology companies can exploit product development, sales, marketing and consulting to focus on delivering customer business outcomes at scale; helping customers to leverage and monetize their data assets to optimize key business processes, reduce security and compliance risks, uncover new monetization opportunities and drive a more compelling customer engagement.
 Here is some background reading for more details on this topic:
- Determining the Economic Value of Data
- Chief Data Officer Toolkit: Leading the Digital Business Transformation – Part I
- Chief Data Officer Toolkit: Leading the Digital Business Transformation – Part II
- Steve Todd’s Data Value Research with Dr. Jim Short of the University of California San Diego: http://stevetodd.typepad.com
Plus, I am currently working on a research paper with the University of San Francisco titled “Applying Economic Concepts To Big Data To Determine The Financial Value Of The Organization’s Data And Analytics, And Understanding The Ramifications On The Organizations’ Financial Statements And IT Operations And Business Strategies” where we will put forth a framework and supporting processes to help organizations to determine (estimate) the economic value from their data.
The post Business Model Transformation and What it Means to the Data Industry appeared first on InFocus Blog | Dell EMC Services.
WebRTC is about the data channel as much as about video and audio conferencing. However, basically all commercial WebRTC applications have been built with a focus on audio and video. The handling of “data” has been limited to text chat and file download – all other data sharing seems to end with screensharing. What is holding back a more intensive use of peer-to-peer data? In her session at @ThingsExpo, Dr Silvia Pfeiffer, WebRTC Applications Team Lead at National ICT Australia, looked at differ...
Feb. 19, 2017 10:30 PM EST Reads: 6,028
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place June 6-8, 2017, at the Javits Center in New York City, New York, is co-located with 20th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry p...
Feb. 19, 2017 09:30 PM EST Reads: 730
IoT offers a value of almost $4 trillion to the manufacturing industry through platforms that can improve margins, optimize operations & drive high performance work teams. By using IoT technologies as a foundation, manufacturing customers are integrating worker safety with manufacturing systems, driving deep collaboration and utilizing analytics to exponentially increased per-unit margins. However, as Benoit Lheureux, the VP for Research at Gartner points out, “IoT project implementers often un...
Feb. 19, 2017 08:00 PM EST Reads: 2,733
SYS-CON Events announced today that Technologic Systems Inc., an embedded systems solutions company, will exhibit at SYS-CON's @ThingsExpo, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Technologic Systems is an embedded systems company with headquarters in Fountain Hills, Arizona. They have been in business for 32 years, helping more than 8,000 OEM customers and building over a hundred COTS products that have never been discontinued. Technologic Systems’ pr...
Feb. 19, 2017 06:45 PM EST Reads: 3,057
SYS-CON Events announced today that IoT Now has been named “Media Sponsor” of SYS-CON's 20th International Cloud Expo, which will take place on June 6–8, 2017, at the Javits Center in New York City, NY. IoT Now explores the evolving opportunities and challenges facing CSPs, and it passes on some lessons learned from those who have taken the first steps in next-gen IoT services.
Feb. 19, 2017 06:15 PM EST Reads: 996
SYS-CON Events announced today that WineSOFT will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Based in Seoul and Irvine, WineSOFT is an innovative software house focusing on internet infrastructure solutions. The venture started as a bootstrap start-up in 2010 by focusing on making the internet faster and more powerful. WineSOFT’s knowledge is based on the expertise of TCP/IP, VPN, SSL, peer-to-peer, mob...
Feb. 19, 2017 06:00 PM EST Reads: 1,311
Containers have changed the mind of IT in DevOps. They enable developers to work with dev, test, stage and production environments identically. Containers provide the right abstraction for microservices and many cloud platforms have integrated them into deployment pipelines. DevOps and containers together help companies achieve their business goals faster and more effectively. In his session at DevOps Summit, Ruslan Synytsky, CEO and Co-founder of Jelastic, reviewed the current landscape of Dev...
Feb. 19, 2017 05:45 PM EST Reads: 5,280
SYS-CON Events announced today that delaPlex will exhibit at SYS-CON's @CloudExpo, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. delaPlex pioneered Software Development as a Service (SDaaS), which provides scalable resources to build, test, and deploy software. It’s a fast and more reliable way to develop a new product or expand your in-house team.
Feb. 19, 2017 05:45 PM EST Reads: 860
The security needs of IoT environments require a strong, proven approach to maintain security, trust and privacy in their ecosystem. Assurance and protection of device identity, secure data encryption and authentication are the key security challenges organizations are trying to address when integrating IoT devices. This holds true for IoT applications in a wide range of industries, for example, healthcare, consumer devices, and manufacturing. In his session at @ThingsExpo, Lancen LaChance, vic...
Feb. 19, 2017 05:00 PM EST Reads: 8,065
With billions of sensors deployed worldwide, the amount of machine-generated data will soon exceed what our networks can handle. But consumers and businesses will expect seamless experiences and real-time responsiveness. What does this mean for IoT devices and the infrastructure that supports them? More of the data will need to be handled at - or closer to - the devices themselves.
Feb. 19, 2017 05:00 PM EST Reads: 1,528
SYS-CON Events announced today that Dataloop.IO, an innovator in cloud IT-monitoring whose products help organizations save time and money, has been named “Bronze Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Dataloop.IO is an emerging software company on the cutting edge of major IT-infrastructure trends including cloud computing and microservices. The company, founded in the UK but now based in San Fran...
Feb. 19, 2017 04:15 PM EST Reads: 1,980
Building a cross-cloud operational model can be a daunting task. Per-cloud silos are not the answer, but neither is a fully generic abstraction plane that strips out capabilities unique to a particular provider. In his session at 20th Cloud Expo, Chris Wolf, VP & Chief Technology Officer, Global Field & Industry at VMware, will discuss how successful organizations approach cloud operations and management, with insights into where operations should be centralized and when it’s best to decentraliz...
Feb. 19, 2017 03:45 PM EST Reads: 1,328
In his session at 20th Cloud Expo, Mike Johnston, an infrastructure engineer at Supergiant.io, will discuss how to use Kubernetes to setup a SaaS infrastructure for your business. Mike Johnston is an infrastructure engineer at Supergiant.io with over 12 years of experience designing, deploying, and maintaining server and workstation infrastructure at all scales. He has experience with brick and mortar data centers as well as cloud providers like Digital Ocean, Amazon Web Services, and Rackspace....
Feb. 19, 2017 02:30 PM EST Reads: 2,158
In his session at @ThingsExpo, Sudarshan Krishnamurthi, a Senior Manager, Business Strategy, at Cisco Systems, will discuss how IT and operational technology (OT) work together, as opposed to being in separate siloes as once was traditional. Attendees will learn how to fully leverage the power of IoT in their organization by bringing the two sides together and bridging the communication gap. He will also look at what good leadership must entail in order to accomplish this, and how IT managers ca...
Feb. 19, 2017 02:30 PM EST Reads: 1,128
The financial services market is one of the most data-driven industries in the world, yet it’s bogged down by legacy CPU technologies that simply can’t keep up with the task of querying and visualizing billions of records. In his session at 20th Cloud Expo, Jared Parker, Director of Financial Services at Kinetica, will discuss how the advent of advanced in-database analytics on the GPU makes it possible to run sophisticated data science workloads on the same database that is housing the rich inf...
Feb. 19, 2017 02:15 PM EST Reads: 979
SYS-CON Events announced today that CA Technologies has been named “Platinum Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY, and the 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. CA Technologies helps customers succeed in a future where every business – from apparel to energy – is being rewritten by software. From ...
Feb. 19, 2017 02:00 PM EST Reads: 960
SYS-CON Events announced today that Cloud Academy will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Cloud Academy is the industry’s most innovative, vendor-neutral cloud technology training platform. Cloud Academy provides continuous learning solutions for individuals and enterprise teams for Amazon Web Services, Microsoft Azure, Google Cloud Platform, and the most popular cloud computing technologies. Ge...
Feb. 19, 2017 01:15 PM EST Reads: 815
The best way to leverage your Cloud Expo presence as a sponsor and exhibitor is to plan your news announcements around our events. The press covering Cloud Expo and @ThingsExpo will have access to these releases and will amplify your news announcements. More than two dozen Cloud companies either set deals at our shows or have announced their mergers and acquisitions at Cloud Expo. Product announcements during our show provide your company with the most reach through our targeted audiences.
Feb. 19, 2017 12:45 PM EST Reads: 1,082
Wooed by the promise of faster innovation, lower TCO, and greater agility, businesses of every shape and size have embraced the cloud at every layer of the IT stack – from apps to file sharing to infrastructure. The typical organization currently uses more than a dozen sanctioned cloud apps and will shift more than half of all workloads to the cloud by 2018. Such cloud investments have delivered measurable benefits. But they’ve also resulted in some unintended side-effects: complexity and risk. ...
Feb. 19, 2017 12:00 PM EST Reads: 697
20th Cloud Expo, taking place June 6-8, 2017, at the Javits Center in New York City, NY, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy.
Feb. 19, 2017 11:45 AM EST Reads: 1,050