Innovating in an Age of Personalization
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Innovating in an Age of Personalization
FountainBlue curates articles and information about the emergence of the Age of Personalization, and how leaders and companies are succeeding with the opportunities ahead.
Curated by Linda Holroyd
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Preparing for What’s Next

Preparing for What’s Next | Innovating in an Age of Personalization | Scoop.it

Preparing for What’s Next
May 20, 2016130,463 views4,258 Likes395 CommentsShare on LinkedInShare on FacebookShare on Twitter
On May 20th, I delivered the keynote at New York University’s Stern Business School convocation. Here are excerpts from my message to the graduates. 

We’re in a volatile, global economy – the most uncertain I have ever seen. There is distrust of institutions. Protectionism is rising. Globalization is being attacked as never before. For those looking to succeed, the playbook from the past just won’t cut it. It’s time to pivot, be bold, and not fear criticism. 

I built my career at GE in a time when productivity, innovation and globalization were the way to win. When I joined the company in 1982, 80 percent of our revenue came from the U.S. Now, 70 percent of our revenue will be global. We have customers in more than 180 countries. We export over $20 billion worth of goods to the world each year. We have become woven into the global economy.

You would think that companies like GE that give people good jobs, make good products, and contribute to their communities would be valued. That governments would try to nurture growth and address big problems like income inequality and unemployment. That global integration would be seen as a force of good and would continue to grow.

You would be wrong. Today, big companies are distrusted; governments and global institutions are failing to address the world’s challenges; and globalization is being attacked as never before.

This is not just true for the U.S., but everywhere. These sentiments have traction in Europe and Latin America, on both the right and the left. The future of the EU is an open question. Protectionist barriers are rising in Asia and Africa. China is repositioning its economy to be more sustainable and inclusive.

The global economy is growing too slowly, and many people feel left behind. Some workers have been displaced by outsourcing, the middle class has been squeezed, and income inequality has risen to unacceptable levels. As technology and globalization race forward, people understandably fear their impact on jobs and incomes, and distrust the motives of companies and government.

There are many causes, and business bears some blame. Productivity has slowed to a crawl and capital investment is declining. Financing is more difficult to get, particularly for infrastructure projects. Investment is required for productivity, which in turn, supports higher wages.

Part of the fault also lies with technology. Innovation has driven growth but also leads to greater instability. The internet can connect people, but doesn’t necessarily give them jobs. Technology has raised the competitive requirements for companies and people. This exacerbates economic insecurity.

Finally, Government is also responsible. In the U.S., regulation has expanded while infrastructure has lagged. Our trade deals are languishing in Congress, and we remain the only developed country in the world without a functioning Export Bank. Our tax code is 30 years old; our immigration system is broken; and a huge structural deficit clouds the future. In the face of this headwind, we are having a raucous Presidential election where every candidate is a protectionist, and globalization is being blamed for unemployment and wage inequality.

Globalization is still essential to growth. But, the globalization I knew, based on trade and global integration, is changing, which is why it’s time for a bold pivot. And in the face of a protectionist global environment, flexible thinking is required, and companies must navigate the world on their own. We must level the playing field, without government engagement. This requires dramatic transformation. This is how we will lead:

We will localize. In the future, sustainable growth will require a local capability inside a global footprint. At GE, we will always be a strong American manufacturer, but we also have built factories in China, India, South Africa, Nigeria, Hungary and elsewhere around the world. We are managing extended supply chains. We are not pursuing low wages; we are using a manufacturing strategy to open markets. We will produce for the U.S. in the U.S, but our exports may decline. At the same time, we will localize production in big, end-use markets like Saudi Arabia.

Our competitive advantage is digital productivity. When we digitize power plants and hospitals by connecting them to the Industrial Internet, we improve global productivity. In Pakistan, we are using analytics to improve energy efficiency and expanding capacity. In India, we can use the internet to deliver healthcare to remote regions. In China, engine analytics are improving airline productivity. Every industrial company must also be a digital leader. This is the next wave of competitiveness.

We accelerate growth by solving local problems. We can make the world work better when we innovate to solve problems with local capability. Our GE technologists around the world have come up with new ways to produce cleaner energy that’s more accessible and to give remote communities access to healthcare. Solutions from the developing world improve outcomes in developed markets.

Financing is the new oxygen of global growth. Capital is the fuel for globalization of the future. We have positioned GE to capitalize on investment flows from new sources. China’s “One Belt One Road” initiative is building new relationships in Central Asia, the Middle East and Africa. Most countries are increasing their export financing. We’ve learned how to invest in these countries, access those pools of capital to support export growth. This is critical as we cannot count on the U.S. EXIM Bank. Companies need to globalize on their own and control our destiny.

Winning requires simpler organizations. Change requires new business models that are leaner, faster, more decentralized. Complex and centralized bureaucracies are obsolete. GE is pushing capability to local teams who are empowered to take risks without second guessing.

We tend to think of globalization as a philosophy, but it is much more about what you do on the ground. Success requires hundreds of little things, and decisions made with a local context. A good global leader has an appreciation for how people do their work in a local culture. They try to make a teams’ work meaningful to their country. This allows us to hire the best talent in every country where we compete.

By taking these bold actions – by pivoting – I am confident we can continue to grow. One thing I know about globalization is that there will always be plenty of critics. Early in my career, I worried way too much about what people thought. Over time I realized that progress counts for more than perfection and that anything worthwhile takes persistence and resilience.

My shield consists of competency, hard work and fairness. I run a meritocracy with the highest standards. Discrimination has no place in business – in the U.S. or anywhere else in the world. Similarly, our factory teams know that, while we cannot guarantee markets, we can guarantee effort; we always play to win.

So be flexible, be bold, don’t fear criticism. We are going through a transformational change in globalization, which will require fresh, new thinking. Our goal is to build an economic ecosystem that is the most competitive in the world. To create great jobs through private enterprise and ingenuity. To give back competency and innovation directed at solving the world’s toughest problems. There is nothing elitist, or establishment, about this task. Only by being in the arena can you create work for others.

The discord we see in the U.S. today is primarily due to slow growth and the wealth discrepancy it creates. This problem will not be solved by any bureaucracy. It requires leaders who see the world as it is and are willing to drive change.

Linda Holroyd's insight:

We will localize, we will digitize

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The sales secrets of high-growth companies | McKinsey & Company

The sales secrets of high-growth companies | McKinsey & Company | Innovating in an Age of Personalization | Scoop.it

The Sales Secrets of High-Growth Companies

The authors of Sales Growth reveal five actions that distinguish sales organizations at fast-growing companies. What distinguishes sales organizations at fast-growing companies from their lagging peers? In a wide-ranging survey of more than 1,000 companies, we unearthed five meaningful differences:

1. Commitment to the future

That the world is changing ever more quickly may be a cliché, but that makes it no less true: all sales leaders know that they need to anticipate changes that could turn into opportunities or threats. Yet the best leaders move beyond acknowledgement to commitment.

They make trend analysis a formal part of the sales process through systematic investments of time, money, and people. Building and sustaining the capability to take a forward-looking view of the market is not easy. In discussions with more than 200 sales leaders while researching our new book, Sales Growth, two common characteristics emerged: the mind-set of sales leadership and resource commitment.

Sales leaders must consistently monitor the macro-environment in search of sales opportunities, no easy task given the relentless pressure to hit near-term targets. Forward planning must be part of someone’s job description—not just part of top management’s lengthy to-do list—with sufficient resources to take advantage of the best opportunities. Companies have to be willing to take risks now to create sales capacity long before the revenue will materialize. More than half of the fast-growing companies1we analyzed look at least one year out, and 10 percent look more than three years out.

After planning, sales leaders aren’t afraid to put their money where they think the growth will be: 45 percent of fast-growing companies invest more than 6 percent of their sales budget on activities supporting goals that are at least a year out—a significant commitment in an environment where sales leaders fight for each dollar of investment.

Exhibit 1

2. Focus on key aspects of digital

Successful brands don’t just “do digital”; they use their full arsenal of capabilities to massively increase the effectiveness of their sales force and to transform the customer buying experience to be “digital first.” It pays off: digital channels provided at least a fifth of 2015 revenues for 41 percent of the fast-growing companies we surveyed—both business-to- business and business-to-consumer—compared with just 31 percent at slow-growing companies.

This trend is only becoming more important, as almost two-thirds of all US retail sales by 2017 will involve some form of online research, consideration, or purchase.2

When it comes to customer experience, leading organizations are building out digital routes to market or augmenting traditional direct or indirect sales with digital. For traditional software companies, the focus on SaaS-based products is driving a change toward a digital sales experience where they discover, demo, and trial, all within a few clicks online. Many industrial companies are seeing their products also sold in external marketplaces, which is prompting them to build out their own e-commerce platforms to directly shape the customer experience.

Exhibit 2

Sales leaders are especially strong at harnessing digital tools and capacities to support the sales organization. Fast-growing companies are more effective than slower-growing ones at using digital tools and capabilities to support the sales organization (43 percent versus 30 percent). They tend to focus on three fronts:

First, they arm sales teams with digital tools that can quickly deliver relevant and usable insights. Second, they treat partners as an extension of the sales force and invest in collaboration tools to improve the flow of data between organizations. Third, they recognize the potential for big micromarket or macrotrend analyses to improve planning and capture opportunities most effectively. As the technology emerges, they are making targeted investments in tools, technologies, and talent to make the most of these opportunities. Success in digital comes from fanatical optimization—not as a one-off project, but as a continuous process. It comes from harnessing mobile technologies to drive growth, understanding how customers use and switch between the mobile channel and other channels. And it comes from integrating digital into a great omnichannel experience that spans marketing to post-purchase.

3. Harnessing of the full range of sales analytics

Only now is the promise of advanced analytics catching up to the hype. Take customer analytics. Companies that use it extensively see profit improvements 126 percent higher than competitors who don’t. And when it comes to sales improvements through the extensive use of advanced analytics, the difference is even larger: 131 percent.3

Exhibit 3

The value of advanced analytics is wide ranging, but where sales leaders excel against their peers is in making better decisions, managing accounts, uncovering insights into sales and deal opportunities, and sales strategy. In particular, they are shifting from analysis of historical data to being more predictive. They use sophisticated analytics to decide not only what the best opportunities are but also which ones will help minimize risk. In fact, in these areas three quarters of fast-growing companies believe themselves to be above average, while between 53 and 61 percent of slow-growing companies hold the same view.

 

But even among fast-growing companies, only just over half—53 percent—claim to be moderately or extremely effective in using analytics to make decisions. For slow-growing companies, it drops to a little over a third. This indicates that there remains significant untapped potential in sales analytics.

4. Investment in people

A rigorous focus on sales-force training is a clear differentiator between the fast- and slow-growing companies we surveyed. Just under half the fast growers spend significant time and money on sales-force training, compared to 29 percent of slow growers. There’s room for improvement, though. Among fast growers, just over half believe their organization has the sales capabilities it will need in the future, while a third of the slow growers feel similarly equipped. As few as 18 percent of fast growers think they excel at pipeline management, and even in the most successful area—understanding specific customer needs—only 29 percent claimed to be outstanding.

Exhibit 4

What is notable from our research, however, is that fast growers are committed to improving sales talent and performance. The head of sales at a North American consumer-services company, for example, tried a new approach to improving sales performance after years of fruitless initiatives. Instead of focusing solely on what the sales force had to do, the program also devoted significant attention to building the talents and capabilities to enable them to do it, making a substantial investment in teaching skills and enforcing their use with specific goals. The result? A 25 percent improvement in rep productivity across all regions within 18 months. More impressive still, the gains stuck, and two years later performance was still improving.

5. Marriage of clear vision with leadership action

Two-thirds of fast-growing companies undertook a major performance improvement over the previous three years, and 84 percent considered it successful or very successful.

Exhibit 5

Sales leaders at these organizations said the two most important factors that contributed to that success were management articulation of a clear and consistent vision and strategy, followed by leadership commitment.

Articulating the vision should be simple. The chief executive officer of an emerging-markets telecommunications firm, for example, announced a “3 × 3 × 3” growth aspiration: three years to expand beyond its home country, three years to expand beyond its region, and three years to become a leading global brand. Besides being simple, the aspiration was bold, specific, and easily measurable.

No sales transformation will work without steadfast support from the very top. Only a committed leader can override internal politics, see the big picture, and focus on the best solution regardless of past practices. Sometimes, the commitment can be very personal. For example, the head of sales at another telecom firm recognized how fundamental customer experience was for success. At the same time that he controversially clamped down on aggressive sales techniques that had a negative effect on customer experience, he proposed to his CEO that customer satisfaction ratings should determine 25 percent of his variable pay.

Sales leaders face a dizzying array of issues and opportunities to manage, often at speeds that seemed unimaginable even a few years ago. But by focusing on what really matters, sales leaders can break away from their competitors.

 

About the author(s)

Homayoun Hatamiis a director in the Paris office,Mitra Mahdavianis an associate principal in the Silicon Valley office,Maria Valdiviesois a senior expert in the Miami office, andLareina Yeeis a senior partner in the San Francisco office.

Linda Holroyd's insight:

Commitment to and focus on and clear strategy, Analytics-based, People-focused, Vision coupled with action 

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The cost of increased income differences

The cost of increased income differences | Innovating in an Age of Personalization | Scoop.it


As individuals, we all want to prosper, be free, and to live our dreams, also in terms of economical liberty. However, even the mathematical foundation of game theory (Nash equilibrium) tells us that the end result will be even better for each individual if we consider what is best for others as well. Economically speaking, we are in "Nash equilibrium" if each one of us is making the best decision possible, taking into account the decisions of the others – as long as the other party's decision remains unchanged, i.e., working towards the same goal. The latter part of the previous statement points to a twofold insight: 1) Societies based on equality are vulnerable to individuals who try to exploit this system, and 2) such societies imply a high level of trust.

The French economist Thomas Piketty specializes in studies on economic inequality, taking a historic and statistical approach. He has helped put the world leaders' attention to the fact that inequality is one of the most important problems of our time. The U.S. President, the U.K. Prime Minister, the Pope, and leaders at the International Monetary Fund, the United Nations, the World Bank, and the World Economic Forum have all emphasized the social cost of increasing the gap between poor and rich.

Interestingly, a quite recent study came to the conclusion that there are two key social features that contributed to the collapse of every single advanced
civilization from the past:

1) "The stretching of resources due to the strain placed on the ecological carrying capacity”.

2)  "The economic stratification of society into Elites [rich] and Masses (or
“Commoners”) [poor]” These social phenomena have played “a central
role in the character or in the process of the collapse,” in all such
cases over “the last five thousand years.” 

Another significant symptom of this inequality, is put forth in the book "The spirit level: Why greater equality makes societies stronger" by Wilkinson and Pickett (2011). They have simply graphed the Income Inequality versus Health Problems:

Even though this may sound like communism to some of us, this model has worked well in the Scandinavian countries after the Second World War. But health problems are now increasing here as well.

None of us wish for a communist state, where everyone is treated, or paid, equal. So, we still need to benefit from a liberal economic system. We also wish to welcome international economic growth. However, economic growth and increases in average incomes have ceased to contribute much to wellbeing in rich countries (Wilkinson and Pickett, 2011, p. 15). It is also interesting to note that "While things such as having poor health, doing badly at school or having a baby when still a teenager all load the dice against your chances of getting up the social ladder, sorting alone does nothing to explain why more unequal societies have more of all these problems than less unequal ones. Social mobility may partly explain whether problems congregate at the bottom, but not why unequal societies have more problems overall" (Wilkinson and Pickett, 2011, p. 24–25). Accordingly, we do not wish to suggest equal payment, equal treatment or a dictatorial society – quite the opposite, we simply point out that a huge difference in income seems to reflect a troubled society.

Poverty is not a certain small amount of good, nor is it just a relation between means and ends; above all it is a relation between people. Poverty is a social status . . . It has grown . . . as an individous distinction between classes . . .
– Marshall Sahlins, Stone Age Economics

Stephen Hawking wrote this on 23 September 2015, and U2 has brought his message to millions of their fans:
"We are here together, and we need to live together with tolerance and respect. We must become global citizens. Our only boundaries are the way we see ourselves. The only borders, the way we see each other… Let us fight for every woman and every man to have the opportunity to live healthy, secure lives, full of opportunity and love. We are all time-travellers, journeying together into the future. But let us work together to make that future a place we want to visit. Be brave, be determined, overcome the odds. It can be done."

General poverty is a tremendous problem to our planet, and a more "global" problem than inequal income. Hopefully we will at some point all recognize that we are indeed one species, totally interdependent, on a joint space journey – points made by many leading figures (Hawking, Bono, etc.). The society we want to co-create implies that nobody tries to exploit the system. High-trust-communities can probably not be built top–down. Perhaps Ken Wilber's version of "Spiral Dynamics" is a proper argument for this. He desribes the top level of society functioning ("Holistic") thus: "Universal holistic system, holons/waves of integrative energies; unites feeling with knowledge; multiple levels interwoven into one conscious system. Universal order, but in a living, conscious fashion, not based on external rules or group bonds."

Observing the current consumption of psychopharmaca (which also has other causes than mental health problems, as the pharmaceutic industry especially in the U.S. has grown into a hugely money-making industry), this signals quite clearly that if we want to prosper and blossom, we actually need to make (or conserve) our society in an optimal range of economical equality. In line with this, it can be interesting to investigate how the world's biggest companies motivate their employees to succeed (no, it's not only about the money – leading companies find that giving people meaning and time, is more effective than raising the salery):

References:
Motesharrei, S., Rivas, J., & Kalnay, E. (2014). Human and nature dynamics (HANDY): modeling inequality and use of resources in the collapse or sustainability of societies. Ecological Economics, 101, 90-102.

Wilkinson, R., & Pickett, K. (2011). The spirit level: Why greater equality makes societies stronger. Bloomsbury Publishing USA.

Linda Holroyd's insight:

The US is a standout on income inequality - not in a good way!

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The Race Against Digital Darwinism: The Six Stages of Digital Transformation

The Race Against Digital Darwinism: The Six Stages of Digital Transformation | Innovating in an Age of Personalization | Scoop.it

We live in a time of digital Darwinism, an era when technology and its impact on business and society are constant with varying, but inevitable, degrees of both evolution and revolution. The effect of digital Darwinism is real and it’s enlivened though changes in people (your customers, employees and partners) and how markets are advancing as a result. To thrive in these times, many companies are investing in digital transformation to drive business evolution and modernization. In fact, all the big research firms and consultancies from Deloitte to Accenture to CapGemini and also my team at Altimeter Group are dedicating significant resources to study how companies are changing because of digital. 

For all of its exposure (or over exposure), digital transformation is relatively young and still developing with much still to understand. For example, in myprevious research, I found that most companies claim to be undergoing digital transformation (88%) but only 25% were doing so with purpose beyond investing in new technology as a means to modernize technology infrastructures. What became clear over the years is that many of the executives who are driving change did so from a technology-first perspective when in fact, this work represents so much more.

Digital transformation is one of those terms that means different things to different people. After studying the space and talking to those leading change, I sought to capture a definition based on what I heard time and time again. The working definition for digital transformation I ended up with was this…

Digital transformation as the realignment of, or new investment in technology, business models, and processes to create new value for customers and employees and more effectively compete in an ever- changing digital economy.

What started as enterprise initiatives led by progressive CIOs and IT organizations has spread throughout every facet of business. Now, executives in other critical functions are also leading investments to bring their own technology roadmaps to life. In some cases, there’s internal competition between groups. For example, CMOs are often cited as the rival to CIOs in spending when it comes to new technologies and resources. But over time, all facets of business must work together under a common vision and aspiration if it is to excel in an era of digital Darwinism. This, I’ve learned, is something that happens only after departments attempt change independently. Eventually, there’s momentum and support to drive collaboration across the enterprise.

How is it that companies start working as one entity? 

Time and time again, it comes down to how people are changing as customers and employees, how their relationship with technology impacts behavior and ultimately how companies, in addition to drive profitability, continually invest in new and emerging tech to remove friction, create new value and scale. This is just the beginning of the digital transformation story. As part of my latest research study, I learned that change plays out in a series of common phases that span several key areas of most organizations.

Introducing a Maturity Model To Guide Your Digital Transformation

Over the last three years, I’ve studied the maturity paths of some of the world’s leading brands including Dell, Discover, GM, Harvard, Lego, Metropolitan Museum of Art, Nestlé, Novartis, Sephora, Starbucks, Target, among many others. The result is a new report, “The Race Against Digital Darwinism: Six Stages of Digital Transformation.” It introduces a maturity framework that documents how companies are advancing technology roadmaps, business models and processes to compete in the digital economy.

This model was developed to help CIOs, CMOs, CDOs, and key stakeholders follow the paths of other successful companies. But more so, it’s meant to give a checklist of sorts to guide, justify, validate, and effectively make the case for driving transformation. 

One of the key insights I learned in the process was that mature companies establish purpose to create the kind of holistic alignment that inspires and drives enterprise-wide change. I consistently found that customer experience (CX) often served as a primary catalyst for driving change with CMOs and CIOs helping them come together to jointly lead common efforts.

Through the lens of customer experience, digital transformation, I learned, organizations evolved through six progressive stages…

  1. Business as Usual: Organizations operate with a familiar legacy perspective of customers, processes, metrics, business models, and technology, believing that it remains the solution to digital relevance.
  2. Present and Active: Pockets of experimentation are driving digital literacy and creativity, albeit disparately, throughout the organization while aiming to improve and amplify specific touchpoints and processes.
  3. Formalized: Experimentation becomes intentional while executing at more promising and capable levels. Initiatives become bolder, and, as a result, change agents seek executive support for new resources and technology.
  4. Strategic: Individual groups recognize the strength in collaboration as their research, work, and shared insights contribute to new strategic roadmaps that plan for digital transformation ownership, efforts, and investments.
  5. Converged: A dedicated digital transformation team forms to guide strategy and operations based on business and customer- centric goals. The new infrastructure of the organization takes shape as roles, expertise, models, processes, and systems to support transformation are solidified.
  6. Innovative and Adaptive: Digital transformation becomes a way of business as executives and strategists recognize that change is constant. A new ecosystem is established to identify and act upon technology and market trends in pilot and, eventually, at scale.

Technology has empowered consumers to become more mobile, social, and connected than ever. This has changed how they interact with each other and with products, services, and businesses. Digital transformation opens the door to new opportunities for innovation in how to design, integrate, and manage customer (and employee) experiences.

By following a digital transformation model, all aspects of business evolve, including management perspectives, roles and responsibilities, operations, work, and, ultimately, culture.

The Six Stages of Digital Transformation represents a journey to evolve with and push ahead of technology and market trends. This is true business transformation. It’s in the ongoing pursuit that makes change less about resolute stages and more about an evolving vision, purpose, and resolve to engage a connected generation of customers and employees. It is the collective efforts of individuals and groups and the collaboration of cross-functional roles that pave the way for a new era of business, work, and customer centricity.

Linda Holroyd's insight:

From Business as Usual to Present and Active, from formalized to strategic, from converged to innovative and adaptive.

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Digital: The Structure of Digital ROI

Digital: The Structure of Digital ROI | Innovating in an Age of Personalization | Scoop.it

Recently I've had the opportunity to debate the ROI of digital capabilities, especially API platforms, with executives mired in traditional ROI justification governance.  They are stuck trying to unlock new ways of doing business, while justifying the acquisition of platforms in terms of ROI for that specific expenditure.  

Here I try to synthesize research from the likes of MIT, CISR, Harvard, consultants and analysts, along with my own observations from successful customers, into a succinct point of view I hope is useful for CFOs and executives advancing their digital agenda.  This entry is not about API platforms, but about the digital enterprise in general.  For guidance specifically on allocating funding in your digital initiative, please refer to Funding Your Enterprise API Program.

Shifting Foundations

Traditional enterprise ROI calculations are usually based on addressable market models with specific characteristics: long payback periods, predictable long-term mass-market consumption and pricing strength, and seemingly efficient cost models based on high volume.  

However, the emerging patterns of business success are quite the opposite:  

  • shrinking horizons for which product are viable, reducing the payback period (shortened by increasingly innovative competition);
  • accelerating marketing cycles and increasingly fragmented customer segments, reducing effectiveness of each particular messaging platform, strategy, campaign or initiative;
  • digital competition launching similar products at lower prices, often using models with alternate monetization strategies.


A Digital Investment Model

Those legacy enterprises that are surviving and thriving now are the ones that can match this stride and are able to accelerate product innovation, diversify marketing, and reduce cost to deliver.  That means the funding models have to change to enable this behavior.  In particular, it helps to break funding into two components:

  • highly adaptable, multi-purpose, loosely coupled platforms that provide underlying robust fundamental business functions like quality, customer privacy, auditability, operational metrics, reliability, security, etc;  and can be reconfigured quickly to produce / support new products, without reworking the platform itself. Platforms here are people / skills, systems / technologies, processes, and contexts.
  • highly product-specific modules that are lightweight, easy and cheap to build / source and launch on these platforms, with little product-specific modifications to the platforms themselves.

The ROI on the platforms is a strategic one; not operating on platforms is simply not an option going forward.  Most enterprises have begun to embrace platforms for CRM, supply chain, finance, marketing, and other business areas.  So the accounting is not to optimize for individual bespoke end-to-end product value propositions, but optimize for the ongoing TCO needed to operate the platforms at a level of operational excellence needed to support a rapidly evolving portfolio of products.  Such successful strategies contain a small collection of multi-purpose platforms, each of which is loosely coupled to the others, and together act as a platform of platforms with little inherent complexity.  At massive scale, enterprises like VW (manufacturing), Diageo (marketing), Unilever (product segmentation), Apple (consumer electronics), Amazon (retailing), and Fast Retailing (fashion) are good examples of platform-based enterprises.  

The ROI on the product-specific modules is based on risk, where each product has short a lifespan, a diversity of go-to-market paths, and an unpredictable risk of failure along any combination of features and go-to-market paths.  So the accounting is not to optimize for longevity, sustain pricing power, or to minimize risk of adoption at product launch, but optimize for ability to launch quickly at low cost, measure outcomes in real-time, adapt the product rapidly, double down quickly on successful adoption, and/or cut losses with little collateral damage.

Innovating into Profitability

This funding model acts as an innovation engine that generates a large diversity of products, each at low incremental cost, with rich instrumentation to detect successful adoption patterns (and/or abandonment) in real time. The engine adjusts its production processes in real time, trimming back product variants that don’t work, and doubling down in volume and diversity on those that do work.

Profitability becomes a secondary effect of this configuration, derived from short-lived, unpredicted, successful adoption of specific product variants.  As soon as it detects successful adoption using the capabilities of the platforms, the enterprise rapidly scales production by quickly replicating (or scaling) the underlying lightweight product-specific modules. During that window of adoption and rapid scaling, the product has pricing power and sustains a profit margin, until competition floods in with other, more indirect revenue models or more cut-rate production capabilities.  Meanwhile, the enterprise innovation engine continues to generate and launch new product variants, finding the next “winners” and scaling them as well.  As the profitability window of certain variants closes, the enterprise can often sunset them, sometimes with a support model that is also a platform in itself, capable of supporting many sunset products to their end of life.  

A Platform of Platforms

From a due diligence perspective, the enterprise architecture for the platform of platforms should end up containing sufficiently configurable and loosely coupled components, such as:

  • A revenue generation platform for billings, payments, and problem resolution;
  • A customer relationship platform, including a profiling and personalization capability;
  • A production platform, producing the core product in a highly modular fashion (insurance policies, cars, software, fashions,, services, etc.);
  • A customer experience platform, including all digital and marketing experiences;
  • A partner / supply chain / channel management platform;
  • An API platform  to easily connect the platforms and connect to every external participant in the value chain, all the way to the individual customer and employee.

Once this larger perspective is accepted by the board and executive suite, other funding decisions and ROI expectations tend to align more easily.  

There is a corollary to this, in that well-tuned and instrumented enterprises running on platforms paradoxically become better able to predict successful products, design more successful marketing campaigns, and forecast profitability more reliably.  But rarely is this success coupled with a reversion to an old way of doing business.  The cultural change that accompanies the evolution to a digital enterprise remains a competitive advantage and allows the enterprise to continue to behave in an agile, innovative manner.  

Does this resonate with your experience?  How are these ideas unfolding in your enterprise?  

Linda Holroyd's insight:

Great thoughts on how business-as-we-know-it is changing and the digital opportunities around platforms and 

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‘Transformer in chief’: The new chief digital officer | McKinsey & Company

‘Transformer in chief’: The new chief digital officer | McKinsey & Company | Innovating in an Age of Personalization | Scoop.it

The CDO role is changing dramatically. Here are the skills today’s world demands.

In the alphabet soup that is today’s crowded C-suite, few roles attract as much attention as that of the chief digital officer, or CDO. While the position isn’t exactly new, what’s required of the average CDO is. Gone are the days of being responsible for introducing basic digital capabilities and perhaps piloting a handful of initiatives. The CDO is now a “transformer in chief,” charged with coordinating and managing comprehensive changes that address everything from updating how a company works to building out entirely new businesses. And he or she must make progress quickly.

SidebarDo you need a CDO?

Given these demands, it’s not surprising that the number of people in CDO roles doubled from 2013 to 2014 and is expected to double again this year.1We find that companies bring in a CDO for two primary reasons. The first is when they need to approach the complex root causes that must be dissected, understood, and addressed before any substantive progress on digitization can be made. And the second is when the CEO realizes the organization can’t meet the primary challenge of creating integrated transformation within its current construct (see sidebar, “Do you need a CDO?”).

In fact, the true measure of a CDO’s success is when the role becomes unnecessary: by its very nature, a high-functioning digital company does not need a CDO (however, it may want its former CDO to be the CEO). Of course, the vast majority of organizations are not yet at that point. And while there are numerous actions companies can and should take to help these executives work themselves out of a job—such as providing sufficient resources and active CEO support—this article focuses on five areas CDOs themselves must get right if their organizations are to successfully transition to digital.

1. Make digital integral to the strategy

Digital isn’t merely a thing—it’s a new way of doing things. Many companies are focused on developing a digital strategy when they should instead focus on integrating digital into all aspects of the business, from channels and processes and data to the operating model, incentives, and culture. Our analysis of how companies with a high Digital Quotient (DQ) operate shows that 90 percent of top performers have fully integrated digital initiatives into their strategic-planning process.2

Getting the strategy right requires the CDO to work closely with the CEO, the chief information officer (CIO), business-unit leaders, and the chief financial officer; the CDO also needs to be an active participant in and shaper of the strategy. An important foundation for CDOs to establish credibility and secure a seat at the strategy table is providing detailed analysis of market trends and developments in technology and customer behavior, both inside and outside the sector.

Yet CDOs can’t stop there. They need to bring a bold vision: 65 percent of companies that are “digital leaders” in our DQ analysis have a high tolerance for bold initiatives; among average performers, 70 percent of companies don’t see support for risk taking. This vision could include starting new businesses, acquiring technologies, or investing in innovations—one CDO we know made it his mantra to drive agile as a new software-development methodology for 40 percent of the company’s projects. No matter how it’s branded, CDOs need to be known within their organization for something that is courageous, new, and adds value.

In addition, CDOs must be specific about their goals. One international publishing house, for example, set a target of generating 50 percent of its revenue and profit from digital media within ten years, and it wound up doing so in almost half that time. Similarly, several banks that set the objective of increasing digital-channel sales to more than 50 percent are seeing that specific and measurable goal rally the organization.

 

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2. Obsess over the customer

While most companies say they know their customers, CDOs must make it a driving passion and core competency of the organization. With technology and customer habits changing so quickly, developing a deep and detailed view of customer behavior across all channels provides a common reference point in any business discussion and arms the CDO to challenge the status quo and make changes. For example, one CDO used the concept of customer journeys and big data mapping of these paths to show her peers where opportunities and pain points existed—and, in doing so, destroyed several myths.

This type of analysis is critical, to be sure, but an equally important part of the CDO’s job is communicating how essential the customer is to the organization. One CDO created clear and visually compelling dashboards on the customer journey and made a habit of consistently referencing them in meetings and when making decisions. Another set up a digitally enabled “war room” with real-time reporting on several key digital metrics, which soon will be piped to the tablets and smartphones of other C-suite executives. Yet another CDO sends regular company-wide emails highlighting customer breakthroughs, insights, and “voice of the customer” anecdotes. Such actions can help the business start to think more specifically about the customer so that everyone approaches all issues with a single crucial question: How will this affect the customer?

Digital capabilities ultimately provide an important foundation for improving the customer experience. It’s up to the CDO to identify those functions where digital is critical: for example, investing in automation capabilities to rapidly respond to customer interactions, developing sophisticated reporting and analytics capabilities to interpret customer needs, building innovative interfaces to gather customer data (for example, an alternative payment method), and creating mechanisms to deliver content and offers across all relevant channels. While the CDO will need to work closely with marketing and IT leadership, he or she should define the customer-experience journey and identify the requirements for developing and then supporting a dynamic system that is constantly learning and evolving.

3. Build agility, speed, and data

CDOs can build strong foundations for change by creating a “spirit of digital” throughout the organization. That could include setting up coding days for the board or holding company-wide hackathons—one company we know even had drones flying around the atrium of its headquarters. Core to building this spirit, however, is increasing the “metabolic rate” of the organization. That starts with changing basic habits, such as having strategy leadership meetings weekly or even biweekly to help ingrain the idea of moving at a faster pace. CDOs must look at how the organization operates and find ways to inject speed into processes. In some cases, it could be as straightforward as working with IT to automate existing development processes. But in others, it will require radically changing how the company works, such as setting extremely aggressive goals—as few as six weeks—for getting a product to market. Some CDOs do this by setting up “digital factories,” which are cross-functional groups focused on developing one product or process using a different technology, operational, or managerial methodology from the rest of the company. Embedding these factories in business units has the advantage of spreading the new culture and making the digital-factory approach the norm.

Managing a portfolio of these types of initiatives requires leaders to be decisive. If the data show a prototype doesn’t work, the CDO must be ruthless about killing the project, incorporating anything learned from the experience, and moving on. On the other hand, CDOs should establish flexible budgeting processes so that projects that show signs of success can get resources to scale quickly.

4. Extend networks

In a digital world, threats often do not come from established competitors but rather from innovative technologies that enable new businesses, start-ups that undermine established business models, or new developments outside the way the company defined its competitive space. For example, one of the big trends in the payments sector is the merging of commerce and payments functionalities in the same app—so, being able to pay for your restaurant meal using the OpenTable app you used to reserve your table.

Successful CDOs are keenly aware of such trends. They build networks of people, technologies, and ideas far outside of their company, constantly scanning the small-business landscape to identify possible acquisitions or partners that can provide complementary capabilities. Some CDOs spend as much as 50 percent of their time working with external partners to build effective working relationships that take advantage of every organization’s capabilities. To help bring these outside voices into the organization, many CDOs establish advisory boards of start-up leaders or create “challenger” boards of people with digital experience and expertise to review corporate initiatives and strategies. At a more pedestrian level, they regularly invite technologists or entrepreneurs to team lunches.

Building an internal network is just as important because company systems and technologies need to be flexible enough to work with outside parties. In particular, CDOs need to work with IT leaders to develop application programming interfaces and cloud-based architecture that works with a broader ecosystem of providers. Some CDOs realize too late that functions such as compliance, finance, human resources, legal, procurement, and risk also need to change to support a more digitally focused company. At one company, for example, an effort to accelerate time to market is in full swing, but procurement still insists it requires six months to approve a vendor. Changing such supporting processes isn’t easy—functions often have good reasons for why processes are undertaken as they are. But brokering compromises and testing new ways of operating that are necessary to make progress will be virtually impossible if a CDO doesn’t build internal networks early and engage with leaders across the business.

5. Get stuff done

CDOs are ultimately judged not by the quality of their ideas but by their ability to lead different types of teams, guide projects, overcome hurdles, and deliver integrated change.

Getting stuff done often requires hard-nosed negotiating skills. Consider the CDO at a financial-services company who wanted to stop business units from draining IT resources on independent projects that didn’t align with the overarching strategy. The CDO worked closely with the CIO and agreed to use her new budget to fund some of his projects; she also helped him retain and motivate key people by staffing them on important digital initiatives (which also assured him visibility into what she was doing). In return, the CIO agreed to stop supporting initiatives that the CDO didn’t explicitly approve. Both won in the end, and they now have a close working relationship.

A new CDO will benefit from the early establishment of near-term goals that can yield quick wins and wow moments that help build enthusiasm and momentum. Some CDOs find that building the marketing-commerce function is a great way to quickly demonstrate value, while others embark on accelerated cost cutting by automating core processes. It pays to define how success is measured, whether it’s tracking key digital and business metrics—such as digital-media revenue as a percentage of total revenue—or creating a full digital profit-and-loss statement (or both). To be meaningful for the business overall and to build credibility, key performance indicators must be aligned with those used by established business units.

Within his first month, for example, the new CDO at one financial-services company defined clear, discrete digital initiatives; developed a long-term vision in partnership with an anchor business-unit leader; and got his budget approved. Within six months, he hired a handful of key employees, launched several initiatives, identified gaps in the organization, and pulled together teams to fill them. A year and a half into the job, he was able to claim some solid wins and moved from a “shadow” profit and loss to an explicit one.

Of course, the projects CDOs commit to must be core to the business—such as developing new revenue streams, cutting costs, or getting to market faster—and not peripheral experiments, which could end up marginalizing their efforts. We’ve actually found it works best when a CDO’s budget is funded through the efficiencies and growth that he or she drives. In addition, we believe that budgeting is critical to ensuring that things get done. Successful CDOs not only time their actions to maximize budgetary flexibility but also change how funding is allocated. One CDO shifted from annual approval of large capital expenses for IT to a more venture capital–like monthly cycle, ensuring he could get more projects funded and launched. This approach also served to maintain funding momentum, with small bites over the course of the year predicated on demonstrated effectiveness.

Defining characteristics of the new CDO

When hiring a CDO, people often agonize over finding someone with experience that is just right. Yet we’ve found it’s the ability to lead transformation across an organization that is the true indicator of likely success in the role, and that requires a combination of hard and soft skills. Hard skills include the ability to articulate a strategic vision, the means to take on problems by identifying root causes across functions and making the tough decisions necessary to resolve them, experience in “pure play” digital and larger company transformations (typically in the consumer and technology sectors), and the managerial ability to lead and see programs through to fruition.

The importance of soft skills should not be understated: some CDOs estimate they spend 80 percent of their time building relationships. In our experience, successful CDOs have the patience to navigate the complex organizational structures of large businesses; additionally, they collaborate to get buy-in across functions and are able to diplomatically challenge the status quo and solidify relationships with a broad group of people. They also demonstrate leadership and charisma that excites the organization to drive change forward.

Of course, companies would be lucky to have executives in any function with this skill set. But driving organization-wide change isdifferent from the mandate for other senior roles. A recent Russell Reynolds Associates survey found that CDOs are meaningfully different from other senior executives across five categories: they are on average 34 percent more likely to be innovative and 32 percent more likely to be disruptive, and also differ with regard to determination, boldness of leadership, and social adeptness.3Leading an organizational transformation is messy work that requires masterful social skills to implement digital initiatives that create disruption by their very nature. Indeed, a CDO’s strong bias for action, bold thinking, and high tolerance for risk requires someone who can also manage the ruffled feathers, bruised egos, and flaring tempers that are common fallout from his or her activities.

As the digital age scrambles the traditional organizational structure, CDOs must not only launch the organization on its digital trajectory but also help it fundamentally evolve. The role requires a “bifocal” approach: achieving the near-term imperative of getting things moving quickly, while setting in place the longer-term conditions of success so the organization can compete digitally. Those CDOs that succeed will truly have earned their place in the already-crowded C-suite.

About the Authors

Tuck Rickards is a managing director at Russell Reynolds Associates, where he coleads the executive-search company’s Digital Transformation Practice. Kate Smaje is a director in McKinsey’s London office, and Vik Sohoni is a director in the Chicago office.

Linda Holroyd's insight:

Here's to the exceptional CDOs out there, and to those who are striving to get there. 

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How China's Increasingly Emotional Consumers Are Shaking the World

How China's Increasingly Emotional Consumers Are Shaking the World | Innovating in an Age of Personalization | Scoop.it

Chinese consumers continue to grow relentlessly in number and wealth. This is a well-studied economic trend. But what people are missing is how the changing behavior of these consumers is now regularly shaking the world.

Suddenly, when Chinese consumers change their minds about something, it ripples outward into the global economy. And this phenomenon is going to get a lot more noticeable in the next years.

The economic trend underlying this is the steady advance of China's urban middle class families. This is the group to watch. According to McKinsey & Co., Chinese urban household disposable income will reach $8,000 a year by 2020. This will be about the same level as South Korea, but in a much, much larger population. After Middle Eastern oil, Chinese urban middle class families are arguably the most valuable natural resource on the planet.

But within this big trend, an important shift is now occurring. Urban families are rapidly transitioning from "value hunters" to more emotional, aspirational and free-spending consumers.

Price-focused consumers have dominated the China story thus far. They typically have had little brand loyalty and tend to shop around for the best deals, mostly for life's necessities. Chinese companies such as Haier Group and China Vanke have done very well selling these consumers air conditioners and apartments at affordable prices.

The more emotional group now emerging, called "new mainstream" consumers by McKinsey, already has life's basics. And they have enough disposable income to buy discretionary items such as lattes and trips to Thailand. What they care about is quality, brands and how products make them feel. So they want real iPhones, not cheap alternatives, and they are able and willing to pay for them. What is fascinating about this group is that they behave similarly to consumers in developed markets.

And here's the factoid that matters. These "new mainstream" consumers accounted for about 5% of China in 2010, with value seekers then accounting for the overwhelming majority. But according to McKinsey, the new mainstream will represent at least half of urban middle class families by 2020. This is the important transition that is happening right now.

It means Chinese consumers are rapidly becoming much more emotional and unpredictable. Suddenly, when Chinese consumers like a movie, such as "Star Wars: The Force Awakens," they become one of the biggest source of revenue for it.

In 2015, McDonald's, KFC and other U.S. fast-food chains got a painful lesson in this phenomenon after media reports of alleged contaminated food in their Chinese outlets. Their global financial results took significant hits. While reported as a food scandal, this incident was really about urban Chinese families caring more about food safety now than in the past.

Overwhelmed

Conversely, if Chinese consumers decide that a particular brand is safe or better than its rivals, foreign companies can suddenly be overwhelmed with orders. This recently happened to Swisse Wellness Group, one of Australia's leading vitamin and supplement companies.

During the first half of 2015, Swisse, which had virtually no operations in China, suddenly found its sales there growing very rapidly. It turned out that Chinese consumers had begun ranking its products highly on Tmall. Revenues for the year (ended in June) jumped to A$313.1 million ($235 million) from A$125.6 million a year earlier. And unsurprisingly, a Chinese company (Biostime International Holdings) quickly bought Swisse in A$1.39 billion deal.

Another example is the story of the Bobbie Bear, a bright purple teddy bear stuffed with lavender and sold by a farm in Tasmania. This small lavender farm, a retirement project of owner Robert Ravenus, became inundated with orders after Chinese model / actress Zhang Xinyu posted a photo of her Bobbie Bear online. Orders surged to more than 45,000 and the farm was forced to suspend online sales, as it could not handle the demand from China.

The company then had to place limits on how many bears could be bought by visitors to the farm's gift shop. Chinese tourists were showing up in Tasmania in droves to make purchases. Annual visitors to the farm exceeded 60,000. At one point, a hacker, presumed to have been Chinese, broke into the farm's computer system to try to place orders.

My point is that increasingly emotional Chinese consumers (i.e., less pure value seeking) are now regularly causing events such as this around the world.

Increasing mechanisms

A second important factor is that the mechanisms through which Chinese consumers can impact companies around the world are increasing. The Swisse vitamin example was possible because cross-border e-commerce, known as "haitao" in China, now lets consumers there buy overseas goods online and get them delivered. Both Amazon and Tmall are charging after this cross-border opportunity right now.

Another mechanism is real estate. Every six to 12 months, Chinese consumers seem to discover a new favorite place and start buying huge numbers of homes there. This phenomenon started in Hong Kong a few years ago. Buying then switched to Vancouver and Toronto. In the last year, we have seen heavy Chinese purchasing of homes in New York and California.

Tourism is another powerful mechanism. The number of trips abroad by Chinese tourists now exceeds 120 million a year and their travels tastes can be unpredictable as well. For example, following the 2012 hit movie "Lost in Thailand," Chinese tourists started flooding into Chiang Mai, the main tourist hub in the area where the movie was filmed. Arrivals to the city were reportedly up 500% in 2013 alone.

So in 2016, two important factors are coming together: the increasingly emotional behavior of Chinese consumers (who are growing in power) and a multiplication of the mechanisms by which this influence can impact the world, often in real-time.

What this means for markets and businesses around the globe is that they can now be directly impacted by what is discussed at dinner tables, in offices and online in China. My recommendation is to start paying attention to those conversations.

Linda Holroyd's insight:

The 'new mainstream' Chinese consumer will change the future of retail and even real estate

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The economic essentials of digital strategy | McKinsey & Company

The economic essentials of digital strategy | McKinsey & Company | Innovating in an Age of Personalization | Scoop.it

July 2015, during the championship round of the World Surf League’s J-Bay Open, in South Africa, a great white shark attacked Australian surfing star Mick Fanning. Right before the attack, Fanning said later, he had the eerie feeling that “something was behind me.”1 Then he turned and saw the fin.
Thankfully, Fanning was unharmed. But the incident reverberated in the surfing world, whose denizens face not only the danger of loss of limb or life from sharks—surfers account for nearly half of all shark victims—but also the uncomfortable, even terrifying feeling that can accompany unseen perils.
Just two years earlier, off the coast of Nazarre, Portugal, Brazilian surfer Carlos Burle rode what, unofficially, at least, ranks as the largest wave in history. He is a member of a small group of people who, backed by board shapers and other support personnel, tackle the planet’s biggest, most fearsome, and most impressive waves. Working in small teams, they are totally committed to riding them, testing the limits of human performance that extreme conditions offer. Instead of a threat of peril, they turn stormy seas into an opportunity for amazing human accomplishment.
These days, something of a mix of the fear of sharks and the thrill of big-wave surfing pervades the executive suites we visit, when the conversation turns to the threats and opportunities arising from digitization. The digitization of processes and interfaces is itself a source of worry. But the feeling of not knowing when, or from which direction, an effective attack on a business might come creates a whole different level of concern. News-making digital attackers now successfully disrupt existing business models—often far beyond the attackers’ national boundaries:
Simple (later bought by BBVA) took on big-cap banks without opening a single branch.
A DIY investment tool from Acorns shook up the financial-advisory business.
Snapchat got a jump on mainstream media by distributing content on a platform-as-a-service infrastructure.
Web and mobile-based map applications broke GPS companies’ hold on the personal navigation market.
No wonder many business leaders live in a heightened state of alert. Thanks to outsourced cloud infrastructure, mix-and-match technology components, and a steady flood of venture money, start-ups and established attackers can bite before their victims even see the fin. At the same time, the opportunities presented by digital disruption excite and allure. Forward-leaning companies are immersing themselves deeply in the world of the attackers, seeking to harness new technologies, and rethinking their business models—the better to catch and ride a disruptive wave of their own. But they are increasingly concerned that dealing with the shark they can see is not enough—others may lurk below the surface.

Deeper forces

Consider an insurance company in which the CEO and her top team have reconvened following a recent trip to Silicon Valley, where they went to observe the forces reshaping, and potentially upending, their business. The team has seen how technology companies are exploiting data, virtualizing infrastructure, reimagining customer experiences, and seemingly injecting social features into everything. Now it is buzzing with new insights, new possibilities, and new threats.

The team’s members take stock of what they’ve seen and who might disrupt their business. They make a list including not only many insurance start-ups but also, ominously, tech giants such as Google and Uber—companies whose driverless cars, command of data, and reimagined transportation alternatives could change the fundamentals of insurance. Soon the team has charted who needs to be monitored, what partnerships need to be pursued, and which digital initiatives need to be launched.

Just as the team’s members begin to feel satisfied with their efforts, the CEO brings the proceedings to a halt. “Hang on,” she says. “Are we sure we really understand the nature of the disruption we face? What about the next 50 start-ups and the next wave of innovations? How can we monitor them all? Don’t we need to focus more on the nature of the disruption we expect to occur in our industry rather than on who the disruptors are today? I’m pretty sure most of those on our list won’t be around in a decade, yet by then we will have been fundamentally disrupted. And how do we get ahead of these trends so we can be the disruptors, too?”

This discussion resembles many we hear from management teams thoughtful about digital disruption, which is pushing them to develop a view of the deeper forces behind it. An understanding of those forces, combined with solid analysis, can help explain not so much which companies will disrupt a business as why—the nature of the transformation and disruption they face rather than just the specific parties that might initiate them.

In helping executives to answer this question, we have—paradoxically, perhaps, since digital “makes everything new”—returned to the fundamentals of supply, demand, and market dynamics to clarify the sources of digital disruption and the conditions in which it occurs. We explore supply and demand across a continuum: the extent to which their underlying elements change. This approach helps reveal the two primary sources of digital transformation and disruption. The first is the making of new markets, where supply and demand change less. But in the second, the dynamics of hyperscaling platforms, the shifts are more profound (exhibit). Of course, these opportunities and threats aren’t mutually exclusive; new entrants, disruptive attackers, and aggressive incumbents typically exploit digital dislocations in combination.

We have been working with executives to sort through their companies’ situations in the digital space, separating realities from fads and identifying the threats and opportunities and the biggest digital priorities. Think of our approach as a barometer to provide an early measure of your exposure to a threat or to a window of opportunity—a way of revealing the mechanisms of digital disruption at their most fundamental. It’s designed to enable leaders to structure and focus their discussions by peeling back hard-to-understand effects into a series of discrete drivers or indicators they can track and to help indicate the level of urgency they should feel about the opportunities and threats.

We’ve written this article from the perspective of large, established companies worried about being attacked. But those same companies can use this framework to spot opportunities to disrupt competitors—or themselves. Strategy in the digital age is often asymmetrical, but it isn’t just newcomers that can tilt the playing field to their advantage.

Linda Holroyd's insight:

When reviewing and creating your company's digitization strategy, look at it from the lens of supply and demand

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Mobile Will Disrupt These Industries Next

Mobile Will Disrupt These Industries Next | Innovating in an Age of Personalization | Scoop.it
Technologists from across the globe recently gathered in Barcelona for the Mobile World Congress, the annual conversation on connectivity and celebration of new gadgets. While the conference traditionally focuses on phones, the discussions about mobile—in Barcelona and beyond—have grown increasingly wide-ranging as mobile technologies continue to seep into more areas of daily life. As one journalist covering the conference eloquently noted, "The Internet is becoming an invisible fabric—like air—that enables all the services we’ve come to depend on." In this schema, mobile devices and their apps are the stitches weaving together these services that help us work, play and live.

Indeed, the rise of mobile technologies has spurred the transformation of industries once considered sleepy into areas where some of the hottest new startups are operating. Uber and Lyft drivers have largely displaced cabbies; Airbnb has won over travelers who had previously booked hotel rooms; Postmates couriers have sped past the bike messengers of yesteryear with their promise of any local product delivered to your door in under one hour.

Looking at the common denominators of these startups gives us some clues about where the next mobility-enabled disruption might occur. First, these companies all offer services characterized by high time-sensitivity. After all, it's far more likely that someone waiting for a ride they've requested will return to a service that supplies a driver in four to five minutes as opposed to ten. By bypassing the dispatching step of traditional cab companies with location-based data capabilities, Uber et al. have cornered that competitive edge.

Second, these companies invest in technology but stay capital light by relying on assets that are already owned by the independent providers they partner with: Cars, bikes, houses and apartments. This low barrier to entry for service providers—no pricey taxi medallion to buy or hotel to maintain— results in the greater supply that drives down costs for consumers and thereby renders these services more desirable.

Finally, these companies are able to use technology to turn what I'll call "serendipity" into operating efficiencies. Theoretically at least, Lyft drivers or Postmates couriers accept jobs close to where they already are when the job comes up. Jobs are done more quickly, which means that workers make more money in less time and customers are more satisfied.

While a variety of industries have one or more of these features of providing time-sensitive services, possessing the option to rely on shared assets, and capitalizing on serendipity, I believe three more traditional areas especially ripe for mobile-enabled disruption are healthcare, staffing and banking. Watch these spaces if you're looking for the next company to have its "Uber moment."

Healthcare

Pioneers in telemedicine are improving access to care for patients who live in underserved areas or who can't otherwise travel to their doctor's offices. Startups like American Well and Doctor on Demand offer live video doctor visits via mobile app for a relatively small patient fee, and they're starting to gain momentum in part by making inroads to employer-sponsored plans. These services might be especially valuable in the arena of mental health, where on-demand offerings are growing and a shortage of face-to-face appointment availability means that patients are often unable to get the timely help they need to avoid crisis.

Staffing

Many of today's contingent workers find project-based "gigs" and other short-term work using mobile workforce platforms like Upwork, Fiverr and the company I co-founded, Gigwalk. The rise of such platforms has changed the game not just for independent workers, but also for HR departments and staffing agencies, which must now bolster their technological capabilities to stay competitive. The employers of today want to work with staffing partners who can anticipate and meet constantly and rapidly shifting staffing needs. The day when the average staffing agency employee wakes up and glances at an app on her phone to get that day's work location and assignment is closer than we think.

Banking

Brick-and-mortar and online-only banks alike have been quick to offer mobile apps that let their customers check balances, transfer funds and deposit checks from their phones, but there's still room for innovation in the key area of cash transfer. While mobile apps like Venmo and Circle let users send or receive cash instantly via text at no charge, we still haven't seen this capability offered at large scale and integrated with other banking services. The area is ripe for players who can wrap these services together at a low price point.

Just like EBay changed the garage sale to a large-scale virtual goldmine in the '90s as it used the Internet to match far-flung buyers and sellers, mobile is causing another wave of disruption that will reward a new crop of innovative players. Wherever they emerge from, they promise to further ease the "life on-the-go" that is our 21st century reality.  
Linda Holroyd's insight:

Mobile continues to turn industries on their head - next up - healthcare, banking and staffing

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What Will The Next President Do About Obamacare?

What Will The Next President Do About Obamacare? | Innovating in an Age of Personalization | Scoop.it
What Will The Next President Do About Obamacare?
With the presidential elections less than a few months away and the race to the White House heating up, it is a good time to take stock and assess the future of healthcare in the United States. The election of a Democrat for president is widely expected to result in a continuation and expansion of the goals set out by the Affordable Care Act (ACA), while the election of a Republican will most certainly result in a roll back of some, if not all, of the act’s key initiatives. What we can expect from either of these electoral outcomes depends entirely on the individual in the Oval Office, the amount of Congressional support he or she is able to generate, and the overall healthcare objectives outlined by the next administration.


Precinct captain Christa DeHerrera, left, puts a band on voter Janell Lindsey after she checked in at a Democratic caucus late Tuesday, March 1, 2016, in Denver. (AP Photo/David Zalubowski)

Scenario 1: Assessing the Healthcare Landscape Following a Democrat Victory

Hospitals will Continue to Benefit from Rise in Insured Population

A Democratic presidential victory will broadly result in the continuation of the ACA with potential to increase the scope, subject to favorable congressional approval. In this scenario, patients will benefit greatly through greater state-based adoption of health exchanges, enhanced federal subsidies from policies purchased on national exchanges and removal of exclusion criteria by insurers. This continued growth in insurance patient base will reduce declining hospital volumes and increase revenues. As per a Moody’s assessment of hospital financial performance in 2015, an increased insurance base has resulted in not-for-profit hospitals witnessing rising revenues (compared to a decline in 2014), while the financial status of for-profit hospitals has shifted from “stable” to “profitable.” Hospitals will use these revenues to provide high-quality acute care services, as well as play a greater role in pioneering novel therapies such as genetic medicine, nano medicine and 3D printing health technologies.

Retail Clinics: The New Linchpin of Care Provision

Rise of ambulatory care providers such as retail clinics and urgent care centers will be critical in transitioning chronic and non-critical emergency care away from hospitals. Hospitals will leverage the rise of these service providers to further decongest emergency wards, reduce operating costs and transition chronic care management of patients outside the hospital. At the same time, ambulatory service providers will also act as patient referral nodes for hospitals. As of 2015, over 100 partnership agreements had been signed between various hospitals/health systems and ambulatory care providers. The number of deals will extend significantly post-2017 as hospitals seek greater collaboration with ambulatory care providers. With an average cost of $100 to $150 per consultation in retail and urgent care clinics, insurers will seek to incentivize patients covered by their plans to seek care from these providers whenever possible.

Primary Care: In Desperate Need of an Overhaul

While primary care will continue to play a key role in the healthcare value chain, with over 60% of primary care practices acquired or in partnerships with hospitals or health systems, the high cost of primary care services and an expected shortage of 46,000 to 90,000 primary care doctors over the next few years will experience the adoption of primary care technologies, such as telemedicine and virtual consultation services, to improve efficiency of care provision.

CMS Spending will Continue to Remain the Bedrock of U.S. Healthcare Spending

While Medicare reimbursements will continue to decline across healthcare providers, greater statewide adoption of Medicaid expansion services will play a key role in financing care, especially for elderly patients and those suffering from one or more chronic conditions requiring care in a specialty long-term care hospital or in residential, semi-residential and nursing facilities. With 283 rural hospitals at risk of closure, Medicaid expansion will be critical in ensuring financial stability of rural hospitals. As of 2015, only 8.3% of rural hospitals were at risk of closure in Medicare expansion states, compared to 16.6% in non-Medicare expansion states. With a rapidly aging population and increase in chronic diseases, enhanced Medicare expansion will be critical in ensuring greater affordability and accessibility to care.

Scenario 2: Assessing the Healthcare Landscape Following a Republican Victory

Reduced Insurance Coverage, Lower Inpatient Volumes and Falling Hospital Revenues Sound the Death Knell for Hospital-Based Innovation

A Republican presidential victory will most likely result in a rollback of some ACA elements, if not the act in its entirety. Rollback of health insurance exchanges, including public, private, state and federal, will likely be the first step, which will result in the reintroduction of exclusion criteria and high co-payment plans for those suffering from pre-existing conditions. This will result in a reduction of patient base, which, in turn, will cause a steep decline in hospital inpatient volumes. This reduction in volumes will undermine and eventually erode the revenue gains made by not-for-profit hospitals over the past year. Traditionally, for-profit hospitals have been more adept at responding to market changes. In the coming years for-profit hospitals will be capable of holding on to patient volumes but will witness reductions in profits. These reduced revenues, coupled with ongoing Medicare cuts, will prevent hospitals from offering high-quality acute care services. Research of novel therapies such as genetic and nano medicine will remain within academic institutions, with large-scale utilization delayed by several years.

Ambulatory Care Providers: Overburdened, Underfunded and Stretched

In this environment, ambulatory care providers will become the de facto providers of choice for the increasing number of uninsured patients, most of which suffer from chronic conditions. Lack of insurance coverage for these types of patients will result in patients having to pay for services out of pocket. This will lead to sluggish revenue growth and will impact the rate at which these providers expand service lines and increase geographical coverage. In this scenario, hospitals will find it increasingly difficult to transition chronic care to these providers, resulting in increasing operating costs, which will impact hospital emergency wards the most.

No Country for Old Men (and Women)

The biggest impact of a Republican victory will most likely be rollback of Medicaid expansion across individual states. While existing Medicaid expansion states may not choose to roll back services, chances of adoption by non-Medicaid expansion states will reduce significantly. This will adversely impact financial health of rural hospitals and LTC providers, resulting in serious gaps in healthcare provision, especially for those patients living in remote areas and those who require 24/7 oversight and care management. With a rapidly aging population and rising incidence of chronic diseases, care providers will become ill-equipped and ill funded to handle the demand for LTC services, resulting in a huge economic burden on caregivers and patient family members.

Placing Pragmatism before Emotion and Rhetoric

Should a Republican win the presidency, he must take steps to ensure that the ACA will continue to be enforced. Rollback of elements of the act, while appealing to conservatives within the party, would most certainly create serious long-term damage to healthcare systems’ ability to cope with the increased demand for care services while continuing to be at the forefront of global medical innovation. It is absolutely imperative that a careful study be conducted to assess the efficacy of the ACA on various aspects of care in order to understand how to make the act more efficient and align it closer to the goals of the next administration.

This article was written with contribution from Tanvir Jaikishen, Senior Research Analyst with Frost & Sullivan’s Transformation Health Program.
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Thought-provoking and on-point, as always. Thank you Reenita Das

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Thoughts on the Future of Work

Thoughts on the Future of Work | Innovating in an Age of Personalization | Scoop.it

There’s  been so much change in the way companies, leaders and businesses work with each other and together, so it’s difficult to plan your future, whether you’re new to the workforce, returning to the workforce or planning how to remain gainfully employed in later years. Here are my thoughts on the type of work that’s available and how to embrace these opportunities and and prepare for the challenges to come.

  1. The tech-philic worker will be favored, and those who reject or deny this fact will be much less employable. Technology will help workers to gather and interpret data and information so that they can be more productive and better serve the customer, both of which are critical to the performance of any company.
  2. The learning-agile worker will be favored. Those who are resistant to learning new ways of doing things will be left behind, especially as automation will replace the need of workers-who-perform-repetitive-tasks.
  3. The communicative worker will more likely succeed as it would be easier for them to work with all the internal and external stakeholders involved in any job – from colleague to teammate, from partner to customer.
  4. The patient, helpful, service-oriented worker will be better positioned to serve demanding customers. There will always be jobs for people who know how to make even the pickiest of customers happy.
  5. Collaboration between people and companies will more likely succeed. Leaders will be those who can envision the benefits of collaborating across roles, companies and industries, and create and facilitate those successful partnerships.
  6. If you combine the 5 traits above, you will find a worker who may be able to tailor products and services to the needs of the customer. There will always be a role for people who can succeed in doing this well.
  7. Company leaders will be more focused on data and analytics, and there will be more meritocracy-based cultures and less politics.
  8. Along those same lines, productivity of people and product/service lines will be based more on data and information, and less on politics and agendas.
  9. Company leaders will help make it easy for adiverse population of workers to succeed – whether it’s making remote work possible or providing tech tools to support an aging or disabled or other non-standard worker.
  10. The bottom line is that companies and leaders will acknowledge that they are only as good as their people, and think, speak and act accordingly.

Those are my thoughts on the Future of Work. How will these things impact YOU? Your comments are welcome.

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How will work change in the future and how will you and your company be affected?

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BigCos, NewCos, and the Nine Trends Remaking Business

BigCos, NewCos, and the Nine Trends Remaking Business | Innovating in an Age of Personalization | Scoop.it
Thanks to NewCo, I’ve gotten out of the Bay Area bubble and visited more than a dozen major cities across several continents in the past year. I’ve met with founders inside hundreds of mission-driven companies, in cities as diverse as Istanbul, Boulder, Cincinnati, and Mexico City. I’ve learned about the change these companies are making in the world, and I’ve compared notes with the leaders of large, established companies, many of which are the targets of that change.

(First published at NewCo. Get the NewCo newsletter here)

As I reflect on my travels, a few consistent themes emerge:

1. Technology has moved from a vertical industry to a horizontal layer across our society. Technology used to be a specialized field. Technology companies sold their wares to large companies in large, complicated IT packages and to consumers as discrete products (computers and software applications). In the past decade, technology has dissolved into the fabric of our society. We all can access powerful technology stacks. We don’t need to know how to program. We don’t need a big IT department either. Now, technology is infrastructure, like our physical systems of highways and roads. This levels the playing field so new kinds of companies can emerge, and it’s forcing big companies to respond to a new breed of competitor, as well as a newly empowered (and informed) consumer base.

2. Big companies are on the precipice of the most wrenching transformation in history — and tech is only part of the reason why.BigCos change very slowly. They are cautious by nature and extremely suspicious of “the new.” BigCos study new developments and wait for proof before they change. As digital technology spread through society over the past three decades, big companies were slow to get a web page, slow to conduct business over the web, slow to lean into mobile and social, and slow to respond to new types of startup competition. Of course, now that the web is mature and consumer platforms like Facebook and Google are massive, BigCos have shifted resources to digital. But that last point — responding to startup and business model competition — is far more problematic, because responding to new kinds of competition isn’t something you can outsource. It requires a fundamental shift in corporate social structure — and culture is hard to change.

3. The next generation’s leaders don’t want to work at BigCos (if they don't have to). In the past year I’ve met with senior executives at massive companies like Nestle, Publicis, P&G, Walmart, Visa, and McDonald’s. When I ask what keeps them up at night, all of them answer “hiring the next generation of leaders.” The best and brightest now see “launching a company,” “working at a startup,” or “working at a digital leader like Google or Facebook,” as a preferable career choice, starving BigCos of their most valuable asset: talent. While one might dismiss young professionals’ penchant for startups as a fad or a phase, there’s something far deeper at work, namely …

4. A job is table stakes. To win talent, companies must compete on purpose, authenticity, and organizational structure. Millennials are now the largest force in the global economy, and they have a markedly different view of work: Purpose and “making a difference in the world” are central in their work-related decisions. They’d rather work at The Honest Company than Unilever, if given a choice — and the best and brightest always have a choice. Members of the next generation want to be at a company where work means more than a paycheck. They believe work can be a calling (Reich) or an expression of our creativity (Florida). BigCos aren’t currently organized to enable their workforces in this way (human resources, anyone?), but NewCos — even the very largest ones like Google — most definitely are.

5. Today’s consumers are newly empowered and are making decisions on more than price. If millennials are choosing employers based on purpose and authenticity, it follows that they decide how they spend their money in similar fashion. Convenience, selection, and price are important, but new kinds of competitors are exposing weaknesses in big companies’ essential truths, and that’s an existential threat. Dollar Shave Club questions Gillette’s core premise,MetroMile questions Geico’s core premise, Earnest does the same to large financial institutions, HolaLuz to energy companies, and the list goes on. Companies profiting from practices or products that demonstrably create more harm than good in the world are threatened in an age of transparency and accountability. Regardless of good intent or excellent marketing, if your business makes people unhealthy, or depends on exploitation of vulnerable workers, or can be laddered to climate change, it’s at risk of mass consumer migration to businesses with better narratives.

6. The platform economy means traditional competitive moats are falling away. Today’s largest consumer companies earned their power by consolidating and optimizing their access to commodities (what their products were made of), manufacturing (how their products were made), and distribution (where their products were sold and how people became aware of them). They were built on humanity’s first global platforms: television and mass transportation networks. We all know that the Internet undermined this hegemony; physical distribution is no longer a surefire competitive advantage (just ask Walmart). But what’s not well understood is how quickly other parts of the product stack have become platform-ized. Just as startups can now access technology as a service, they can also access sourcing and manufacturing as a service (Dollar Shave doesn’t make its blades, for example). This of course bolsters point #5 above: If any company can access the same economies of scale, brands must compete on more than price or distribution, they must compete on voice, innovative (and information-first) approaches to markets, and purpose.

7. Cities are resurgent. I just returned from Mexico City, which earlier this month hosted its first NewCo festival. While there, I heard a refrain consistent with my visits around the world: The city is changing for the better and new kinds of companies are at the heart of that change. When people gather at NewCo meetups or inside NewCo sessions, I keep hearing “There’s just no way these kinds of companies could have made it in this city ten years ago.” Coupled with the horizontal force of technology and the rise of a purpose-driven zeitgeist, cities have become both the epicenter of humanity’s greatest challenges, as well as the birthplace of our greatest innovation. One generation ago, one-third of humanity lived in urban centers. Today, it’s more than 50 percent. One generation from now, more than two-thirds of us will reside in the tangled banks of a city center, and that number will surpass 80 percent by the end of this century. Cities offer access to capital, education, regulatory frameworks, and a collaborative density of human curiosity and connections. It’s where great companies are born and grow.

8. BigCos are deeply aware of all this — and a massive shift is about to reveal itself. For as long as I’ve been in the media and technology business, I’ve heard big company executives proclaim they were committed to change. But it always rang hollow: Large companies expended far more resources preventingchange than they ever did committing to it. Over the past year, however, I’ve sensed a deep shift in the tone of my conversations with BigCos. These are some of the smartest people in the world, and they understand the technological, generational, and social tectonics at play. In their board rooms and C-suites, conversations are already underway about changes so significant, they’ll be viewed as “calendar reset” moment: Before Shift and After Shift. We’re already seeing leading indicators — Walmart’s commitment to sustainability, GE’s move to Boston, Publicis’s rewritten purpose statement and organizational structure — but in the next year or two, the pace will quicken. New CEOs at category-leading companies like McDonald’s, Ford, and P&G will most likely announce stunning new initiatives that would have been inconceivable a decade ago.

9. The best NewCos realize there’s a lot to learn from the BigCos. After years of feasting on BigCo markets, “established upstarts” like Google, Facebook, Uber, Zenefits, and Square are transitioning from cultures based on “move fast and break things” and “ask for forgiveness, not permission.” Their leaders are now turning to questions like “How do I build a company that will last for generations? How can I maintain a strong corporate culture when I have thousands of employees? How do I work productively with regulatory and policy frameworks, now that I’m an established player?” Turns out, BigCos have decades, if not centuries, of experience in answering these kinds of questions. In my conversations with leaders of both NewCos and BigCos, I sense a new kind of detente as each side realizes how much it has to learn from the other. In the coming months and years, I expect we’ll see a lot more cooperation between the two.

In the coming months, NewCo will be focused on exploring these business trends, with new media and event products. If you’d like to join the conversation, please follow us on Facebook or Twitter, hit “Like” below, and/or sign up for our daily newsletter. We believe this the most important story in business, and we’re committed to covering it for you.

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Insightful thoughts on how tech convergence and the empowerment of customers and demands of employees will affect companies of all sizes

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Shire's Baxalta Acquisition: An Orphan Drug Market Dream?

Shire's Baxalta Acquisition: An Orphan Drug Market Dream? | Innovating in an Age of Personalization | Scoop.it

After a long list of mergers and acquisitions in healthcare, what does Shire’s acquisition of Baxalta mean for the industry?

Research suggests approximately 95% of the estimated 6,000+ rare diseases are yet to have a single FDA-approved drug treatment. However, this could be a thing of the past, going by the current trends in the market.

The acquisition of Baxalta by Shire being a case in point, following the trodden path of the Sanofi-Genzyme and the Roche-Genentech deals. With this successful acquisition, Shire is moving to consolidate its position in the orphan drugs market across therapeutic segments ranging from gastroenterology to lysosomal disorders.

Understandably, the orphan drug segment has enjoyed a longer exclusivity status from FDA, with companies spending less on shorter trials with smaller patient populations, along with a provision for a maximum pricing power to the invested pharma company, has made this segment a sweet spot for pharma mergers and acquisitions.

With the minimized patient population available for clinical trials, the market is also open to the adoption of genetic biomarkers and clinical endpoints for orphan drug clinical trials, a major step towards personalized medicine.

The orphan drugs market is very attractive: it’s worth $100+ billion and has a CAGR of 12%, almost twice of the general drugs market. Of the top 10 projected best-selling drugs worldwide in 2015, almost seven bear the orphan status. Additionally, the market has had favorable regulatory environment, having witnessed a record year for FDA/EU/Japan orphan designations in 2014.

Baxalta’s acquisition is very logical, as the company’s assets complement Shire’s rare disease platform, which made up 40% of Shire’s 2014 revenue. Additionally, it follows Shire’s recent portfolio expansion with the purchase of NPS Pharmaceuticals and its drugs for a rare disease, short bowel syndrome.

The combined entity can be shaped as a global leader in rare diseases with multiple billion-dollar franchises in high-value therapeutic areas with substantial barriers to entry. It puts Shire in fourth spot, very close to Celgene and within reach of the market leaders of orphan drug sales, Novartis and Roche. Building a strong diversified portfolio and achieving market leadership is very crucial for Shire to compete in this market, estimated to be worth $180+ billion in 2020!

This acquisition is in line with large platform acquisition activity like Abbvie-Pharmacyclics (2015) Amgen-Onyyx (2013) and Sanofi-Genzyme (2011), and also helps access a lower effective tax rate for the combined entity by 2017-2018.

This piece was written with contribution from Sangeetha Prabakaran, Program Manager and Nitin Naik, Vice President of Global Life Sciences with Frost & Sullivan’s Transformation Health Program.

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'The combined entity can be shaped as a global leader in rare diseases with multiple billion-dollar franchises in high-value therapeutic areas with substantial barriers to entry.'

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The ‘tech bubble’ puzzle | McKinsey & Company

The ‘tech bubble’ puzzle | McKinsey & Company | Innovating in an Age of Personalization | Scoop.it

Article - McKinsey Quarterly - May 2016
The ‘tech bubble’ puzzle
By David Cogman and Alan Lau

Public and private capital markets seem to value technology companies differently. Here's why.

Aggressive valuations among technology companies are hardly a new phenomenon. The widespread concerns over high pre-IPO valuations today recall debates over the technology bubble at the turn of the century—which also extended to the media and telecommunications sectors. A sharp decline in the venture-capital funding for US-based companies in the first quarter of the year feeds into that debate,1 though the number of “unicorns”—start-up companies valued at more than a billion dollars—over that same period continued to rise.

The existence of these unicorns is just one significant difference between 2000 and 2016. Until seven years ago, no venture capital–backed company had ever achieved a billion-dollar valuation before going public, let alone the $10 billion valuation of 14 current “deca-corns.” Also noteworthy is the fact that high valuations predominate among private, pre-IPO companies, rather than public ones, as was the case at the turn of the millennium. And then there’s the global dimension: innovation and growth in the Chinese tech sector are much bigger forces today than they were in 2000.2
All of these factors suggest that when the curtain comes down on the current drama, the consequences are likely to look quite different from those of 16 years ago. Although the underlying economic changes taking place during this cycle are no less significant than the ones during the last cycle, valuations of public-market tech companies are, at this writing, mostly reasonable—perhaps even slightly low by historical standards. A slump in current private-sector valuations would be unlikely to have much impact on the broader public markets. And the market dynamics in China and the United States are far from similar. In this article, we’ll elaborate on the fundamentals at work, which extend beyond the strength of the current pipeline of pre-IPO tech companies, and on the funds that have washed over the venture-capital industry in recent years.

The lessons of history

The defining feature of the 2000 tech bubble was that it was a public-market bubble. At the start of 1998, valuations for tech companies were 40 percent higher than for the general market: at the peak of the bubble in early 2000, they were 165 percent higher. However, at that point the largest-ever venture-invested tech start-up we could find evidence of barely exceeded a $6 billion valuation at IPO—a small number by today’s standards. Moreover, a considerable part of the run-up in valuation came not from Internet companies but from old-school telecom companies, which saw the sector’s total value grow by more than 250 percent between 1997 and 2000.

Equity markets seem to have learned from that episode. In aggregate, publicly held tech companies in 2015 showed little if any sign of excess valuations, despite the steadily escalating ticket size of the IPOs. Valuations of public tech companies in 2015 averaged 20 times earnings, only 10 percent above the general market, and they have been relatively stable at those levels since 2010.

By historical standards, that’s relatively low: over the past two decades, tech companies on average commanded a 25 percent valuation premium, often much more. During the technology and telecommunications bubble of 2000, the global tech-sector valuation peaked at just under 80 times earnings, more than 3 times the valuation of nontech equities. And over the five years after the bubble burst in 2001, the tech sector enjoyed a valuation premium of, on average, 50 percent over the rest of the equity market (exhibit). Even with a focus limited to Internet companies—the sector most often suspected of runaway valuations—there is no obvious bubble among public companies at present.

Nor do these companies’ valuation premiums appear excessive to the general market when viewed in the light of their growth expectations. Higher multiples are in most cases explained by higher consensus forecasts for earnings growth and margins. The market could be wrong in these expectations, but at least it is consistent.

China is a notable exception, though equity valuations in China always need to be viewed with caution. Before 2008, Chinese tech companies were valued on average at a 50 to 60 percent premium over the general market. Since then, that premium has grown to around 190 percent. Why? In part because the Chinese online market is both larger and faster growing than the United States, and the government has ambitious plans to localize the higher-value parts of the hardware value chain over the next few years.3 The growth in China’s nonstate-owned sector is another part of the story. Many of the new technology companies coming to the market in the past five years have been nonstate-owned, and nonstate-owned companies are consistently valued 50 percent to 100 percent higher than their state-owned peers in the same segments.

This time, it’s different?

Where the picture today is most different from 2000 is in the private capital markets, and in how companies approach going public.

It wasn’t until 2009 that a pre-IPO company reached a $1 billion valuation. The majority of today’s unicorn companies reached that valuation level in just the past 18 months. They move in a few distinct herds: roughly 35 percent of them are in the San Francisco Bay area, 20 percent are in China, and another 15 percent are on the US East Coast.

Notable shifts in funding and valuations have accompanied the rising number of these companies. The number of rounds of pre-IPO funding has increased, and the average size of venture investments more than doubled between 2013 and 2015, which saw both the highest average deal size and highest number of deals ever recorded. Increases in valuation between rounds of funding have also been dramatic: it’s not unusual to see funding rounds for Chinese companies involving valuation increases of up to five times over a period of less than a year.

Whatever the quality of new business models emerging in the technology sector, what’s unmistakable is that the venture-capital industry has built up an unprecedented supply of cash. The amount of uninvested but committed funds in the industry globally rose from just over $100 billion in 2012 to nearly $150 billion in 2015, the highest level ever. And where buyout, real-estate, and special-situations funds all have the luxury of looking across a range of deal sizes, industries, or even asset classes, venture capitalists have less flexibility. Many venture funds fish in the same pool of potential deals, and some only within their geographic backyard.

The liquidity in the venture-capital industry has been augmented by the entry of a new set of investors, with limited partners in some funds looking for direct investment opportunities into venture-funded companies as they approach IPO. This allows companies to do much larger pre-IPO funding rounds, marketed directly to institutional investors and high-net-worth individuals. These investors dwarf the venture-capital industry in scale and can therefore extend the runway before IPO, though not indefinitely: their participation is contingent on the promise of an eventual exit via IPO or sale.

Thus valuations of individual pre-IPO start-ups need to be viewed cautiously, as the actual returns their venture-capital investors earn flow as much from protections built into the deal terms as by the valuation number itself. In a down round (when later-stage investors come in at a lower valuation than the previous round), these terms become critical in determining how the pie is divided among the different investors.

The IPO hurdle

Private-equity markets do not exist in isolation from public markets: with few exceptions, the companies venture capitalists invest in must eventually list on public exchanges, or be sold to a listed company. The current disconnect between valuations in these two markets will somehow be resolved, either gradually, through a long series of lower-priced IPOs, or suddenly, in a massive slump in pre-IPO valuations.

Several factors incline toward the former. Some late-stage investors, such as Fidelity and T. Rowe Price, have already marked down their investments in multiple unicorns, and it’s increasingly common for start-up IPOs to raise less capital than their pre-IPO valuations. Given the still-lofty level of those valuations, this no longer attracts the extreme stigma that it did in 2000. Regardless of how the profits divide up, the company is still independent and now listed.

Tech companies also are staying private for, on average, three times longer.4 A much greater share of companies wait until they are making accounting profits before coming to market. From 2001 to 2008, fewer than 10 percent of tech IPOs were launched after the company had reached profitability: since 2010, almost 50 percent had reached at least the break-even point. The number of companies coming to market has remained relatively flat since the 1990s technology bubble. But the average capitalization at IPO time has more than doubled in the past five years, reflecting the fact that the companies making public offerings are larger and more mature.

What happens post-IPO? Over the past three years, 61 tech companies have gone public with a market cap of more than $1 billion. The median company in this group is now trading just 3 percent above its listing price. The valuations of a number of former unicorns are lower still, including well-known companies like Twitter in the United States and Alibaba in China.

History paints a challenging picture for many of these recently listed companies. Between 1997 and 2000, there were 898 IPOs of technology companies in the United States, valued collectively at around $171 billion. The attrition among this group was brutal. By 2005, only 303 of them remained public. By 2010, that number had declined to 128. In the decade from 2000 to 2010, the survivors among these millennials had an average share-price return of –3.7 percent a year. In the subsequent five years, they returned only –0.8 percent per annum—despite soaring equity markets.

The geographic dimension

The current crop of pre-IPO companies is far more diverse than in 2000. It will be particularly interesting to see which of the two largest geographic groups—the US and the Chinese unicorns—weathers the shakeout best. Consider just Internet companies. The total market value of listed Internet companies today is around $1.5 trillion. Of this, US companies represent nearly two-thirds, and Chinese companies—mostly listed in the United States—almost all of the remainder. The rest of the world put together amounts to less than 5 percent.

The differences between the unicorns in these regions are revealing. Of the more than 100 unicorns operating in the United States and China, only 14 have overlapping investors, and just two—the electronics company Xiaomi and the transportation-network company Didi Chuxing (formerly Didi Kuaidi)—account for two-thirds of the combined valuation of all of them. Three-quarters of the Chinese unicorns are primarily in the online space, compared with less than half of the US unicorns, and these serve separate user bases as a result of regulatory separation of the two countries’ Internet markets.

It is not obvious which group holds the advantage. The local market to which Chinese Internet companies have access is substantial, with well over twice as many users as in the United States; the e-commerce market is significantly larger and growing almost three times as fast. Moreover, the three Chinese Internet giants, Baidu, Alibaba, and Tencent, have invested in many of the Chinese unicorns, giving them easier access to a platform of hundreds of millions of users on which to operate.

The Chinese unicorns also have a much higher proportion of “intermediary” companies—start-ups that act primarily as channels or resellers of other companies’ services and take a cut of earnings. Around a third of the Chinese unicorns have business models of this kind, compared with only one in eight of their US counterparts. Finally, the US start-ups tend to adapt faster to a global audience. Although there are several established Chinese technology companies that have successfully made the leap to the global stage, such as Huawei, Lenovo, and ZTE, very few of the companies founded in the past five years have reached that point.

For all the differences between the tech start-up markets of today and those of 2000, both periods are marked by excitement at the potential for new technologies and businesses to stimulate meaningful economic change. To the extent that valuations are excessive, the private markets would appear to be more vulnerable. But perspective is important. The market capitalization of the US and Chinese equity markets declined by $2.5 trillion in January alone. Any correction to the roughly half a trillion dollars in combined value of all the unicorns as of their last funding round is likely to seem milder than the correction of the last technology bubble.

About the author(s)

David Cogman is a principal in McKinsey’s Hong Kong office, where Alan Lau is a director.

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The new world of sales growth | McKinsey & Company

The new world of sales growth | McKinsey & Company | Innovating in an Age of Personalization | Scoop.it

Historically, sales and marketing have not always been harmonious bedfellows, but the opportunities afforded by big data and the complexities of connecting with customers in more granular ways require integrated and collaborative models that bring marketing and sales together.

On average, a B2B customer will regularly use six different interaction channels throughout the purchase process, and two-thirds come away frustrated by inconsistent experiences. The notion of a customer decision journey (CDJ) around which marketing and sales collaborate has become embedded in many leading sales organizations, but the journey differs by customer segment, with needs and expectations varying at each stage. Insightful customer research and advanced analytics mean these segments can be defined ever more precisely by marketing, but that work is wasted unless sales reaches the right people with the right offer. Nor is the onus all on marketing. Both functions generate enormous volumes of valuable data on customer segments and preferences, but at outperforming companies, the front line reports back to help marketing refine its value propositions.

As data becomes more readily available and easier to crunch, companies can move from broad-based predictive modeling to a much more personalized approach. Information from past interactions with a customer or from existing sources can be used to instantaneously customize the buyer’s experience. Remembering customer preferences is just the beginning; true personalization is the next wave in a customer’s journey and helps drive loyalty.

Pay attention to presales

For B2B sales, “personalization” is about delivering tailored solutions. To do that, sales organizations need a very clear understanding of customer needs. This requires technical experts to be involved with customers at a very early stage in the buying journey. These presales specialists are so important that one account manager at a global technology company said, “Every sales leader would say they couldn’t run the business without a specialist. The competitive dynamic is such that if you don’t bring your A-game to the deal, you’re not going to win.”

In addition to getting experts working on deals, the presales function can play a vital role in qualifying leads. Social media, digital marketing, advanced analytics, and the more pervasive use of inside sales have exponentially increased the number of deals a company can pursue. But too many potential deals can have a negative effect on the organization by diffusing focus and taxing resources. It is far more efficient and effective to qualify leads using data and analytic tools, so that only the most attractive ones then move into the pipeline.

Despite its importance, presales is often understaffed and overlooked. A high-performing sales organization should have about two-thirds of its presales team undertaking technical presales activities (crafting solutions to customers’ problems) and the rest involved with commercial presales activities (managing deal qualification, pricing, and bid). For maximum productivity, the function should account for 40 to 50 percent of the overall commercial headcount. B2B companies with strong presales capabilities consistently achieve win rates in excess of 40 percent in new business, which is 10 to 15 points higher than we usually observe.

Although this technical sales support is most associated with B2B sales, it can apply to B2C, too. Apple’s product geniuses may be the best-known examples, but some car dealers send the product expert, not the salesperson, out on the customer’s test drive to answer questions.

With its focus on how digital technologies, data, and analytics are changing the face of selling, it’s natural that Sales Growth concludes with some thoughts on where the future may lie for sales organizations. The pervasive automation of back-office processes and the complete outsourcing of the sales function, enabled in part by precisely this technology shift, are redrawing the lines of sales management.

Machine learning and intelligent automation are already transforming a wide range of industries and functions. By 2020, customers will manage 85 percent of their relationship with an enterprise without interacting with a human, and 40 percent of sales activities could be automated using technology that already exists.4
“Cognitive agents” such as IPsoft’s Amelia, already understand, interact, and—crucially—learn in order to solve customers’ problems in industries from financial services to telecommunications. They can parse natural language and independently determine which questions to ask in order to diagnose what the customer really needs and act accordingly. It’s a small step from helping customers tackle basic processes to selling, and Amelia can already solve basic customer problems, for example, moving a customer to a more comprehensive phone tariff.

These new technologies and trends do not spell the end of salesmanship. They will fulfill much of the presales work, but many sales will still need people to close them. Making sure that the right salesperson is in place is becoming easier, too, thanks to analytics. Matching the seller with the lead and equipping the salesperson with the maximum amount of useful information to close the deal will characterize the new sales environment.

AI can be deployed beyond just responding to queries. Today, even with modern CRM systems, only a quarter of leads are actually contacted. A bot can contact 100 percent of them and do so in a relatively engaging, human-like manner that should not put off any potential customers.5 Companies that have pioneered the use of AI in sales rave about the impact, which includes an increase in leads and appointments of more than 50 percent, cost reductions of 40 to 60 percent, and call-time reductions of 60 to 70 percent. Customers love it too—these companies have seen an increase in customer satisfaction as customers get what they want faster.

Sales teams will need to be comfortable with algorithms and able to work with data scientists and marketing-tech experts to design solutions. Sales leaders, meanwhile, will need clear escalation and exception protocols to manage the trickiest or most valuable situations. As the machines get smarter, the biggest differentiator of success will be the human touch. Senior executives will need to ask the right questions, vigorously approach the exceptions that the machines highlight, and shine in the areas that AI will always struggle with: ambiguity and emotional engagement.

With more sales organizations turning to technology vendors to solve problems, is it only a matter of time before the whole sales function is outsourced? Outsourcing the part of your business that involves selling to customers sounds risky at first, but for pioneering companies, the fact that the salesperson doesn’t work directly for the company no longer matters, nor is it important that s/he may be selling products from several different companies in the same category over the course of a week. What matters for the manufacturer is that someone is out there pounding the pavement, the phone, and the digital platforms, getting the product into the hands of customers more cheaply and effectively than the company can do itself.

Telesales is the most common form of outsourcing, but we have also seen a big rise in the outsourcing of sales operations. Alongside CRM, companies are outsourcing sales-compensation programs, lead-generation insights, sales analytics, account planning, and other operations. In return, they benefit from lower costs of operation, greatly reduced error rates, and the ability to shift their limited resources and energy to the critical parts of their business that they are best equipped to manage.

CEOs have valid reservations, yet sales often has significant variation between top and bottom performers and thus is ripe for being handed over to companies that can bring costs down and performance up. Outsourcers are experts at standardization and script every part of the sales interaction to bring the average performance up to the highest levels.

As outsourcing providers become more sophisticated, they are likely to infiltrate more complex B2B sales settings where customers need more tailored solutions and managing accounts still requires the personal touch.

About the author(s)

Thomas Baumgartner is a director in McKinsey’s Vienna office; Homayoun Hatami is a director in the Paris office, and Maria Valdivieso is Director of Knowledge, based in the Miami office.

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Defense Wins Championships | Longboard

Defense Wins Championships | Longboard | Innovating in an Age of Personalization | Scoop.it
DEFENSE WINS CHAMPIONSHIPS
How to build a winning alternatives strategy

BY ERIC CRITTENDEN
APRIL 29, 2016

Longboard’s original research proves that over the long term, a small minority of stocks drive returns for the overall market.

If you’ve heard of the Pareto Principle before, this might not surprise you.

What does this mean for investors? It may be more efficient to navigate this reality by getting defensive, and strategically avoiding the majority in this equation: the underperforming investments.

Be aware of disproportionate rewards

Here’s a closer look at our research on this competition gap in action in the U.S. stock market.



We analyzed 14,455 active stocks between 1989 and 2015, identifying the best performing stocks on both an annualized return and total return basis.

Looking at total returns of individual stocks, 1,120 stocks (7.7% of all active stocks) outperformed the S&P 500 Index by at least 500% during their lifetimes. Likewise, 976 stocks (6.8% of all active stocks) lagged the S&P 500 by at least 500%. The remaining 12,404 stocks performed above, at or below the same level as the S&P 500.

The principle of the competition gap remains true in practice: The minority accumulates a disproportionate amount of the total rewards, creating a “fat tail” distribution of extreme outperformers and underperformers with a large gap between the two.

Focus on the minority

What’s more, the left tail in the stock market’s competition gap (or distribution) is significant. 3,431 stocks (23.7% of all) dramatically underperformed the S&P 500 by 200% or more during their lifetimes.



So, let’s say an investor’s portfolio missed the 20% most profitable stocks between 1989 and 2015. Instead, he invested in only the other 80%. His total gain would have been 0%.

Once again, the principle holds true: Over the long term, the more efficient approach is to strategically avoid the many underperformers.

Seek alternative long-term returns
To get more benefits from alternative allocations, investors can seek long-term trend following strategies that proactively trim investments that don’t perform over time. These more defensive strategies are better positioned to avoid sustained downtrends — and a diversified portfolio with fewer strategies trapped in sustained downtrends can recover more quickly.

What’s more, some of the same strategies that can deliver this downside protection can add further diversification, potentially delivering results that are uncorrelated to the market and to other alternatives.

Methodology

This research was originally published by Cole Wilcox and Eric Crittenden of Blackstar Funds in 2006. Since then, Blackstar Funds has become Longboard Asset Management, and the organization updated its research in 2016 to focus on data from 1989–2015.

Our database covers all common stocks traded on the NYSE, AMEX and NASDAQ since 1989, including delisted stocks. Stock and index returns were calculated on a total return basis (dividends reinvested). Dynamic point-in-time liquidity filters were used to limit our universe to the approximately 4,000 most liquid stocks each year, representing approximately 99% of the investable U.S. equity market. In total, 14,455 stocks were evaluated (due to index reconstitution, delisting, mergers, etc.).

Disclosure

The information set forth herein has been obtained or derived from sources believed by Longboard Asset Management to be reliable. However, Longboard does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does Longboard recommend that the attached information serve as the basis of any investment decision. This document is approved for public use. This document has been provided to you for information purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such.

Longboard hereby disclaims any duty to provide any updates or changes to the analysis contained in this spreadsheet. Market analysis, returns, estimates and similar information, including statements of opinion/belief contained herein are subject to a number of assumptions and inherent uncertainties. There can be no assurance that targets, projects or estimates of future performance will be realized.

There is a risk of substantial loss associated with trading commodities, futures, options, derivatives and other financial instruments. Before trading, investors should carefully consider their financial position and risk tolerance to determine if the proposed trading style is appropriate. Investors should realize that when trading futures, commodities, options, derivatives and other financial instruments could lose the full balance of their account. It is also possible to lose more than the initial deposit when trading derivatives or using leverage. All funds committed to such a trading strategy should be purely risk capital.

Index performance in this document was sourced from third-party sources deemed to be accurate, but is not guaranteed. All index performance is gross of fees and would be lower if presented net of fees. Indices referenced are not representative of the entire futures or trading universe. Investors cannot invest directly in the indices referenced in this document.

Diversification does not eliminate the risk of experiencing investment losses. Past performance is not an indication of future performance.
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92 of the Biggest, Costliest Startup Failures of All Time | Businessgyan

92 of the Biggest, Costliest Startup Failures of All Time | Businessgyan | Innovating in an Age of Personalization | Scoop.it

MARCH 17, 2016 92 of the Biggest, Costliest Startup Failures of All Time  

From financial fraud to just running out money, we scanned our database to identify 92 of the most expensive startup flameouts in history. For those who’ve been reading, we’ve had failure on the brain recently. This is partly because its a good counterbalance to the typical survivorship bias laden stories we read and also because understanding failure is critical to the algorithms underlying our product. In this review of failure, we’ve looked in our venture capital database to find the most well-funded startup companies that ultimately failed or that had an undesirable exit, i.e. an asset sale or in some cases an acquisition for less than the total funding raised by the company. As you’ll see below, the reasons for failure are varied but a few common threads do emerge such as running out of money, inability to generate sustainable revenue, bad product-market fit and losing to competitors. And then there were some uncommon and more dramatic causes of failure including: Financial fraud Lawsuits A most-wanted founder We’ve broken down the companies that failed by the amount of funding they received and start with those that failed that raised over $100M (Ouch). We then highlight discussion about the reasons for failure based on press reports.  

 

Update 1 (March 11, 2016)

Total Funding: Over $100M

Company: KiOR  

Select VC Investors: Khosla Ventures, Alberta Investment Management Corporation, Artis Capital Management  

Total equity financing raised: $252.9M  

Different parties disagree about which side was responsible — Khosla Ventures or [chemical engineer Paul] O’Connor and the CEO — but most agree that KiOR made poor hiring decisions as it staffed up. The result was a relative preponderance of lab researchers with Ph.D.s and a dearth of people with technical, operational experience running energy facilities. The lack of people with real operational experience “hurt KiOR a lot,” says O’Connor. via Fortune  

 

Company: Quirky

Select VC Investors: RRE Ventures, Kleiner Perkins Caufield & Byers, Andreessen Horowitz

Total equity financing raised: $185.3M

Steering the ship — handling all of the engineering, manufacturing, marketing, and retailing, even when you’re taking 90 percent of the subsequent profits — was ultimately too expensive of a proposition, especially in comparison to other, less-handholding-oriented start-ups. “The reason why Kickstarter makes a ton of money is they don’t have to do anything besides put up a website,” [founder Ben] Kaufman notes. via New York Magazine  

 

Company: Powa Technologies

Select VC Investors: Wellington Management, Otto Group

Total equity financing raised: $176.3 million + at least $50 million of debt

The chief executive’s downbeat tone was a stark contrast to an optimistic tone last year. “I’ve forced you to hold out your nerve because I asked you to and I’ve taken you through that, but we’re past that point and now it’s all sunshine and light,” he said in a staff video. In a meeting with the Financial Times last April, [Dan] Wagner compared himself to John Rockefeller, the US business magnate who dominated the oil and rail industries in the 19th century. He believed Powa would set down mobile payments infrastructure that would be just as revolutionary. “What we’re building here is the biggest tech company in living memory,” he said in his offices in Heron Tower, a skyscraper in the heart of the City of London. A person with knowledge of the matter said that Powa could be paying as much as £2.5m a year.

via The Financial Times   

 

Company: Lilliputian Systems 

Select VC Investors: Kleiner Perkins, Atlas Venture, Intel Capital Total equity financing raised: $150.4M The Nectar system had its roots at MIT’s Microsystems Technology Lab — and may have simply left the lab a few years too early. via Beta Boston   Company: Rdio  Select VC Investors: Atomico, Mangrove Capital Partners Total equity financing raised: $117.5M “Rdio, I guess, made the mistake of trying to be sustainable too early,” says [early employee Wilson] Miner. “That classic startup mistake of worrying about being profitable and having a business that makes any sense before you’ve reached this astronomical growth curve. Which is partly the trap of the business model itself — because of the content licensing deals, the margins for the business were so incredibly thin. No matter what we did, the labels made the lion’s share of the revenue. You have to make it up with extreme volume, which is why you see Spotify going after every human being in the world.” via The Verge  

 

Company: OnLive Select VC Investors: Lauder Partners, Time Warner Investments Total equity financing raised: $116.5M First there were doubts about its ability to deliver a lag-free experience, then business troubles led to a form of bankruptcy followed by big layoffs and a buyout, and all sorts of uncertainty after that. via Kotaku  

 

Company: Coraid Select VC Investors: Azure Capital Partners, Menlo Ventures Total equity financing raised: $114.3M Its U.S. operations and had not been successful in raising new funding, among other things. A CRN report earlier this month said the company was closing up for good and was filing for bankruptcy. via Venture Beat  

 

Company: Terralliance  Select VC Investors: Kleiner Perkins Caufield & Byers, Goldman Sachs, DAG Ventures Total equity financing raised: $296.3M “All told, the investors had sunk nearly half-a-billion dollars into Terralliance, an astounding sum given the audacity of the company’s aspirations — and the paucity of its accomplishments.” via Fortune  

 

Company: Solyndra Select VC Investors: Redpoint Ventures, US Venture Partners Total equity financing raised: $1.22B Even industry heavyweights such as China’s Suntech Power Holdings Co Ltd and U.S.-based First Solar Inc are struggling with dwindling profits, while small, up-and-coming solar companies are finding it increasingly difficult to stay afloat. Solyndra said it was evaluating options, including a sale of the business and licensing its copper indium gallium selenide (CIGS) technology. via Reuters  

 

Company: Webvan Group Select VC Investors: Sequoia Capital, Softbank Capital Total equity financing raised: $275.2M “They spent so much money on all this infrastructure, which was basically part of their business model,” [stock analyst David] Kathman said. “But what they hoped was going to be their advantage turned out to be their downfall. They got big fast, but size turned out to be an albatross when the demand wasn’t there.” One reason demand fell short was that Webvan wasn’t as convenient as it billed itself, Kathman said. via SFGate  

 

Company: Better Place Select VC Investors: VantagePoint Capital Partners, Lend Lease Ventures Total equity financing raised: $675.3M The bet was risky because it required large geographies — indeed, entire nations — to adopt the technology in order for it to scale successfully. The company chose small countries like Israel and Denmark to test its model, but the company’s upfront costs kept mounting, and it kept delaying debuts. Also, a number of competing electric car efforts, including the venture by new company Tesla but also by the Big 3 and other manufacturers, kept the industry from adopting any one standard. via VentureBeat  

Company: Amp’d Mobile Select VC Investors: Highland Capital Partners, Columbia Capital, Redpoint Ventures Total equity financing raised: $324.5M Maybe it was Verizon’s most recent in-court request to stop serving up costly airwaves for which it couldn’t pay, maybe it was the cold reality that it’ll allegedly have a mere $9,000 in the bank as of next Monday — but at any rate, Amp’d Mobile appears ready to throw in the towel. via Engadget  

 

Company: AllAdvantage.com Select VC Investors: Alloy Ventures, Walden Venture Capital Total equity financing raised: $133.8M In a statement posted on the site, the company said the move was taken because “the advertising and capital markets have changed so fundamentally that it is now impossible to continue our infomediary incentive programs and benefits.” . . . The company saw traffic to its Web site drop significantly during the last six months of 2000. In June, the site was drawing visitors 2 million visitors each month, according to Nielsen/NetRatings. That number dropped to less than 600,000 by December. via San Francisco Business Times  

 

Company: Kozmo.com Select VC Investors: Oak Investment Partners, Flatiron Partners Total equity financing raised: $256.5M  If making money on operations was a near impossibility, Kozmo seemed perpetually on the precipice of tapping into the public equity markets. Meanwhile, it floated other plans, like starting a print catalogue and delivering for local retailers. But then they discovered that other retailers had their own deliverymen. via Forbes  

 

Company: eToys Select VC Investors: Bessemer Venture Partners, Sequoia Capital Total equity financing raised: Undisclosed, but raised $166.4M at IPO  The company also said it was on the verge of being delisted from the Nasdaq stock exchange. The exchange sent a notice to eToys, threatening to remove the company by May 2 because it has failed to maintain at least a $1 share price for 30 consecutive days, according to Gary Gerdemann, spokesman for eToys. The events were not a complete surprise, given that company executives had cautioned late last year that eToys had only enough cash to remain open through March. via The New York Times  

 

Company: Caspian Networks Select VC Investors: New Enterprise Associates, US Venture Partners Total equity financing raised: $260M First core routing. Then P2P networking. Then net neutrality. Investors apparently put the kibosh on the company before it crow-barred itself into another communications fad. via Light Reading  

 

Company: Pay By Touch Select VC Investors: Mobius Venture Capital, Rembrandt Venture Partners Total equity financing raised: $130M Despite those early customers, processing fingerprint payments has not taken off as expected. Pay By Touch claims that it has fingerprint scanners in 3,000 stores, but the privately held company has never disclosed how many transactions it processes. For millions of consumers accustomed to using credit and debit cards, the proposition of using a fingerprint hasn’t been all that appealing. “It’s hard to fight the credit-card companies,” says Gartner (IT) analyst Avivah Litan. “Consumers are so used to racking up frequent-flier miles and other rewards that it’s like a David vs. Goliath situation. There’s just not much of a value proposition for the consumer to use a fingerprint.” via Bloomberg Businessweek  

 

Company: RealNames Corporation Select VC Investors: Draper Fisher Jurvetson, Clearstone Venture Partners Total equity financing raised: $116.2M RealNames said it had no choice to but to close operations as Microsoft was its primary distribution partner. Microsoft was owed $25 million for RealNames “resolutions” already delivered over the past two years and remained unwilling to bet that RealNames would become successful in the long-term. In addition, Microsoft expressed concerns about the quality of RealNames keywords that were sold.  The bad guy in all of this is clear: Microsoft, at least when reading the commentary posted on the weblog run by RealNames founder and former CEO Keith Teare, as well as comments he’s made to the press. via Search Engine Watch  

 

Company: Boo.com Select VC Investors: Arts Alliance Total equity financing raised: $135M “The firm mis-timed and failed to execute on a good idea,” Torris said. “They started by keeping most of their target audience out,” she added, referring to the need for high-speed connections to easily use the site. Torris said Boo.com also spent too much on advertising and promotions and failed to keep pushing forward on technology innovations. She pointed out that sites such as Landsend.com now feature similar “try on” technology and that third party vendors have begun to develop similar Web sites. via eCommerce Times  

 

Company: Savaje Technologies Select VC Investors: VantagePoint Venture Partners, RRE Ventures Total equity financing raised: $113.7M Now the company is close to closing its doors as it seeks additional funding from venture capitalists. The company, which employs about 140 people, had furloughed its developers and some other employees early in October, asking them to use up their vacation time or go on unpaid leave while Savaje moved to find its way out of its financial troubles. via eWeek  

 

Company: Pets.com Select VC Investors: Hummer Winblad Partners, Bowman Capital Total equity financing raised: $110M Almost from the start, Pets.com was a losing proposition, despite its backers’ talk about how much money consumers lavish on their pets. Many pet supplies are heavy and costly to ship — cat litter, cans of dog food — and the firm couldn’t sell enough higher-profit items such as pet toys. Moreover, to attract customers, the company depended heavily on discounts, said Jupiter Communications analyst Heather Dougherty. As a result, the firm was selling supplies below cost the entire time. via The Wall Street Journal  

 

Company: Cereva Networks Select VC Investors: Oak Investment Partners, North Bridge Venture Partners, Intel Capital, Goldman Sachs Total equity financing raised: $109.5M A victim of swiftly shrinking corporate IT budgets and a sharp drop in demand for the startup’s large-scale enterprise storage systems, the Marlborough, MA.-based company last week abruptly shut down and laid off 140 employees. via DSstar  

 

Company: COPAN Systems Select VC Investors: Globespan Capital Partners, Austin Ventures Total equity financing raised: $108.4M The COPAN product was well differentiated. The weakness was their not understanding, focusing and exploiting its sweet spot. A consequence of an incomplete or erroneous market understanding and a sole reliance on the internal body of experience and knowledge. via Toolbox.com  

 

Company: Calxeda Select VC Investors: Battery Ventures, Flybridge Capital Partners Total equity financing raised: $103M ARM server chip designer Calxeda has shut down as one of its executives told The Register: “We simply ran out of money.” via The Register Total Funding: $75M – $100M  

 

Company: DeNovis, Inc. Select VC Investors: Advanced Technology Ventures, UV Partners Total equity financing raised: $97.8M  In a Boston Globe interview in January, he had indicated that the company’s financial performance was a pressing concern. He said the $22 million in venture capital the company raised nine months ago was effectively its last chance. But having spent such a large sum of venture capital, DeNovis needed to go public or find a deep-pocketed buyer to return a large profit to its investors. Burkett said at the time, ”I only hear that about 11 times a day.” via Boston Globe  

 

Company: Aereo Select VC Investors: FirstMark Capital, Highland Capital Partners Total equity financing raised: $97M Inside the infrastructure that drove its online service, it assigned every Aereo user a mini broadcast TV antenna, and it used this to argue that its service was no different than sticking a pair of bunny ears on your television. That way, Aereo could avoid paying retransmission fees for broadcasters’ content. But broadcasters never bought this argument, and when it came down to it, neither did the US Supreme Court. via Wired  

 

Company: Canopy Financial Select VC Investors: GGV Capital, Foundation Capital Total equity financing raised: $89.5M …company management discovered earlier this month financial records provided to investors and lenders that were “fraudulent,” as well as “significant financial and accounting irregularities.” via Wall Street Journal  

 

Company: Soapstone Networks Select VC Investors: Accel Partners, Oak Investment Partners Total equity financing raised: $87.3M Soapstone was an underdog from the start. Even as a known quantity, it was going to have to wrestle with the slow process of qualification at big carriers. The recession certainly didn’t help. And it seems to me (and one source from outside Soapstone agrees) that while Soapstone wasn’t entirely wrapped up in PBB-TE (Provider Backbone Bridging – Traffic Engineering), the stall in that technology’s ascent was a contributing factor, too. via Light Reading  

 

Company: Claria Corporation Select VC Investors: US Venture Partners, Crosslink Capital Total equity financing raised: $84M The company realized that there were too many ad networks out there, and with the souring outlook for advertising, it made better sense to close shop and sell the company’s extensive set of patents, the source said. via VentureBeat   

 

Company: SunRocket Select VC Investors: Anthem Capital, BlueRun Ventures Total equity financing raised: $79.3M Analysts have been predicting that it would be difficult for companies, like SunRocket and the more popular Vonage, to base an entire business around a VoIP service. While VoIP makes it relatively cheap to serve customers, it’s still expensive to acquire them. via CNET  

 

Company: 38 Studios Select VC Investors: Rhode Island Economic Development Corporation Total equity financing raised: $75M Add it all up, including interest, and already-cash-strapped Rhode Island could be out as much as $110 million on the loans. As Schilling sits beside the softball diamond, his company, with nearly $151 million in debt and just $22 million in assets, is being liquidated through Chapter 7 bankruptcy. via Boston Magazine   Total Funding: $50M – $75M

 

Company: Beenz.com Select VC Investors: Gefinor Ventures, Apax Partners Total equity financing raised: $73.8M After the Internet bubble burst, e-currency companies tried to evolve by concentrating on business customers, but the collapse of a high-profile trailblazer such as Beenz shows that the Old Economy credit card companies have probably won the online shopping battle. Experts believe that online currency sites such as Beenz were overtaken as a way of shopping online by credit cards, which had the advantage of being virtually universally accepted both on and offline. via CNET  

 

Company: Veoh Networks Select VC Investors: Shelter Capital Partners, Spark Capital Total equity financing raised: $70.8M . . . the venture was pronounced dead in a tweet today by Veoh board member Todd Dagres of Spark Capital, a Boston VC firm that invested in Veoh Networks. Dagres tweeted, “Veoh is dead. Universal Music lawsuit was the main killer. Veoh won resoundingly but was mortally wounded by the senseless suit. Next.” via Xconomy  

 

Company: Dash Navigation Select VC Investors: Kleiner Perkins Caufield & Byers, Sequoia Capital Total equity financing raised: $41M, sold for $8.3M to BlackBerry    User adoption was slow, likely because the device carried a $600 price tag (later reduced to $399), but the service won praise from many reviewers, including Om. The navigation device was designed with true mobile web access and interactivity in mind, but sales were sluggish. via Gigaom       

 

Company: Move Networks   Select VC Investors: Hummer Winblad Venture Partners, Steamboat Ventures   Total equity financing raised: $60.3M    So what went wrong? For one thing, Move Networks never reached critical mass on the consumer side of things; despite early success with ABC, Fox, the CW, and others, many media companies shied away from the technology because it required a plugin that not many consumers had installed. This created a vicious chicken-and-egg problem: How do you get people to install the plugin if it’s not being used to deliver good premium content? And how do you get good premium content unless people already have the plugin installed? via Gigaom  

 

Company: Nirvanix Select VC Investors: Valhalla Partners, Mission Ventures Total equity financing raised: $70M By trying to play in the pure storage business, Nirvanix found itself in a market that, over the past five years, became increasingly commoditized by Amazon Web Services, Windows Azure and now Google Compute Engine, which have all been engaging in a price war. With no service to offer on top of its storage, Nirvanix did not stand a great chance of differentiating from such large competitors. via TechCrunch  

 

Company: Expand Networks Select VC Investors: The Challenge Fund-Etgar, Tamir Fishman Ventures Total equity financing raised: $69M Although Expand Networks won appreciation for its technology, its operational performance was much less impressive. The court documents show that it was losing $ 250,000 a month and had $ 11 million revenue in 2010. Although it was a pioneer in its field, it failed to make a breakthrough. via Globes   

 

Company: Ecast Select VC Investors: Doll Capital Management, Crosslink Capital Total equity financing raised: $66.8M  The San Francisco-based technology firm’s board of directors voted for an immediate shutdown after the company failed to raise enough capital to continue operating. “We worked diligently for this not to happen,” said Ecast vice-president of network operations Scott Walker. “We appreciate all the support from jukebox operators and the industry.” via Vending Times  

 

Company: Edgix Select VC Investors: Battery Ventures, Venrock Total equity financing raised: $65M “Companies that joined in during the last few years are primarily the ones dropping out. Many never had a sound business model to begin [with]. Edgix is one example. The company was basically a carbon copy of Cidera and other ISP caching solutions, with little new to offer. They basically launched a platform and went into business believing they would quickly generate revenue. Unfortunately for companies such as Edgix, once you continually say to investors, ‘There is a market out there and we can own it,’ you start to believe it yourself.” via Newsday  

 

Company: DoubleTwist Select VC Investors: Institutional Venture Partners, Boston Millennia Partners Total equity financing raised: $56.6M  Two months later, DoubleTwist bowed to the inevitable. “No one was surprised by this,” Williamson told the San Francisco Chronicle, “but everyone was disappointed. We had a great product and a great team — we just didn’t have the revenues.” via Bio-IT World  

 

Company: Akimbo  Select VC Investors: Zone Ventures, Draper Fisher Jurvetson Total equity financing raised: $54.7M The company had raised $4 million earlier this year from existing investors, but Chantel said the company was looking to raise $8 to 10 million to become cash positive with its new white-label strategy. Unfortunately, “there wasn’t enough runway to execute the plan,” he said. via Gigaom  

 

Company: Sequoia Communications Select VC Investors: Tallwood Ventures, BlueRun Ventures Total equity financing raised: $54M Luis Arzubi, a general partner at Tallwood Ventures, told EE Times that Sequoia (San Diego) was forced to cease operations despite having working parts and customers because it failed to raise the needed capital to continue. The company and its investors “basically had no choice,” he said. via EE Times Total Funding: $25M – $50M    

 

Company: Carrier IQ Select VC Investors: Accel Partners, CRV, and Mohr Davidow Ventures Total equity financing raised: $42M Knowledge of what (our) software tracked unbeknownst to the average user clearly hit a nerve with a public already skeptical about how private information is regarded by large corporations and other organizations for their own purposes … And so, unsurprisingly, following the revelations, there was a windfall of announcements about which companies were using it (and were not using it) to collect information; lawsuits over privacy violations and legislation drafted to tighten controls for the future. Some of those class-action suits, it appears, have been settled. As AT&T did not acquire the full company, we understand that it will not be liable for any outstanding litigation or settlements against CIQ. via Tech Crunch  

 

Company: Homejoy Select VC Investors: First Round Capital, Google Ventures, Max Levchin Total equity financing raised: $39.7MM CEO Adora Cheung said the “deciding factor” was the four lawsuits it was fighting over whether its workers should be classified as employees or contractors. None of them were class actions yet, but they made fundraising that much harder. “A lot of this is unfortunate timing. The [California Labor Commission’s] Uber decision … was only a single claim, but it was blown out of proportion,” she told Re/code. via ReCode  

 

Company: Laguna Pharmaceuticals  Select VC Investors: Sante Ventures and Versant Ventures Total equity financing raised: $34.5M  Two months into its roughly 600-patient initial Phase 3 trial, called Restore SR, researchers started to see side effects that would not have enabled Laguna to market the drug as widely as they had initially anticipated, [Laguna CEO Bob] Baltera said. “We were actually very surprised,” he said. “The [prior] Phase 2 study was robust.” Baltera declined to say much about the side effects, describing them only as “safety signals.” “The normal response in this business is to find a way forward,” Baltera said. “But it just wasn’t going to be commercially viable. Rather than trying to find any path forward, we decided to shut the company down.” via Xconomy   

 

Company: Healthspot Select VC Investors: BlueTree Allied Angels Total equity financing raised: $32.7M Jason Gorevic, CEO of telemedicine company Teladoc, expressed his belief that there are three critical elements to success in this industry segment: the technology platform, clinical capabilities and consumer engagement. “Consumer engagement is hard to do,” Gorevic said. This is where HealthSpot may have fallen down. Teladoc has two revenue streams: a per-member, per-month fee it charges its partners, plus a per-visit fee. “Because we have both of those revenue sources, we can pour that money back into our customers.” … Also, Teladoc is purely a software company, so it doesn’t have the overhead associated with building and delivering kiosks … A bigger issue, according to [CEO of American Well Roy] Schoenberg, is that HealthSpot required patients and providers to pre-arrange appointments; it was not truly telemedicine on demand. “You actually have to build a lot of administration around it,” he said. via MedCity News  

 

Company: Nebula Select VC Investors: Highland Capital Partners and Kleiner Perkins Caufield & Byers Total equity financing raised: $25M + $3.5M in debt At the same time, we are deeply disappointed that the market will likely take another several years to mature. As a venture backed start up, we did not have the resources to wait. via Nebula  

 

Company: Nanochip  Select VC Investors: New Enterprise Associates, JK&B Capital Total equity financing raised: $48.8M “No matter what, you’ll need $70 million to take [Nanochip's technology] into production,” he [ CEO Gordon Knight] said. That’s a large hurdle considering established chip companies have not been very active buyers lately and venture investors only put $327 million in chip deals in the first half of this year – not even half the amount for the same time last year, according to VentureSource, a research unit of Dow Jones & Co. via Wall Street Journal  

 

Company: Joost Select VC Investors: Sequoia Capital, Index Ventures Total equity financing raised: $45M  Joost attracted investment — $45 million to be exact — because it appeared to be the antithesis of YouTube, suspected by the networks of enabling and then turning a blind eye to piracy. Indeed, news coverage at the time billed Joost as a “YouTube killer.” But while YouTube proved popular, was acquired by Google and came to dominate web video, adoption of Joost was stunted by its peer-to-peer technology, which allowed high-quality video but required a clunky software download. via Crain’s New York  

 

Company: Pixelon Select VC Investors: Advanced Equities “In April, Pixelon employees and investors were surprised to learn that the real name of Michael Fenne, the company’s founder and former chairman, was Paul Stanley. And they were more shocked to find out that Paul Stanley had been on Virginia’s most-wanted list for several years, after skipping bail following a stock-swindling conviction.” via Wired   

 

Company: Digg Select VC Investors: Highland Capital Partners, Greylock Partners Total equity financing raised: $44M “In the soon-to-be end, Digg will become known as the first network to die from social fatigue,” wrote Mike Phillips in June 2010. “Facebook and Twitter are booming, LinkedIn is holding steady and even Myspace seems to have settled into a niche. But Digg is in a deadly, unrecoverable tail spin. “The fact is, people – real people – are beginning to tire. Submit this, upload that, vote on this, ‘like’ that, be my ‘friend’, check in here, suggest this, retweet that … there’s already so much to do. The only thing left to ‘Digg’ is a grave.” via The Guardian  

 

Company: ThumbPlay Select VC Investors: i-Hatch Ventures, Softbank Capital Total equity financing raised: $41M Our source tells us that the sale is a do-or-die scenario because the company is running out of cash: “The price is very low. No one is making any money.” . . . the music industry has been hit hard with cannibalisation from digital sales and piracy. And the promise of new revenues, on the back of the explosion in mobile and internet usage, have yet to materialise for most music companies, with Apple’s iTunes dominating the market with more than a 60 percent share. via Gigaom   

 

Company: Color Labs Select VC Investors: Bain Capital Ventures, Sequoia Capital Total equity financing raised: $41M Nevertheless, the app simply failed to gain much traction with users, with reviewers often commenting that Color appeared to be an app trying to solve a problem that didn’t seem to exist. via PCMag   Company: Goodmail Systems Select VC Investors: Doll Capital Management, Emergence Capital Partners Total equity financing raised: $40M Daniel Dreymann, cofounder and CEO of Goodmail, said the biggest reason for the shutdown was an aborted acquisition attempt by a firm he would only call a “Fortune 500 company.” via Direct Marketing News  

 

Company: Vente-Privee Select VC Investors: Summit Partners Former employees said Granjon and his co-founders mismanaged the U.S. operation. For example, the co-founders were insulted when their American team adapted the design of the site to be more user-friendly. Confused by the presence of Facebook share buttons, a fairly standard feature for e-commerce sites, Granjon once asked a manager, “Why are you running ads for Facebook on my website?” via Fortune  

 

Company: Xeround Select VC Investors: Benchmark Capital, Ignition Partners Total equity financing raised: $39.8M + $4M of debt Xeround is shutting down their MySQL Database as a Service (DBaaS) because their free instances, while popular, simply did not convert into sufficient paid instances to support the company. via Head in the Clouds  

 

Company: Webvisible Select VC Investors: Sutter Hill Ventures, Redpoint Ventures Total equity financing raised: $37M “Even with all our efforts to recover throughout this past year, we found ourselves in a position in which the debt load of the company was simply too much to overcome. Our bank foreclosed on its loan which means they are taking over the company’s assets and collecting all remaining payments. As a result they have forced the company to shut down.” via TechCrunch  

 

Company: ArsDigita Select VC Investors: Trident Capital, Greylock Partners Total equity financing raised: $35M The technical and managerial incompetence of the VCs and those they hired drove the company into the ground. All but 10 of the 240 employees were fired, laid off, or quit. All of the $40+ million in venture capital was squandered. The monthly operating profit turned to loss as more talentless executives were hired who threw out the company’s old, useful products and put their blind faith in engineers who spent millions building complicated software that solved no business problems. via Content Wire  

 

Company: Optiva Select VC Investors: AltoTech Ventures, NGEN Partners Total equity financing raised: $30M  Like most other nanotech companies, Optiva took a while to get its product out. It shifted focus, its technology changed, as did the market. Its “polarizer” technology was supposed to be sold for use in wrist watch, calculator and PDA displays, but as VentureWire reports, suddenly the people who already made the displays found a glut of scrap material, which was also suitable, thus resulting in a rapid drop in market prices. via SiliconBeat  

 

Company: Flooz.com Select VC Investors: Oak Investment Partners, Maveron Total equity financing raised: $51.5M  While the company says it suffered in an unfavorable economic climate, credit card fraud also played a part in its demise. “We have been the victims of organized credit card fraud,” says Levitan, who says Flooz was hit for $300,000 for transactions charged to card numbers stolen by an international crime ring. The company’s credit card processor was holding $1 million in Flooz’s funds to cover chargebacks, says Levitan. via Internet Retailer   

 

Company: AdBrite Select VC Investors: Sequoia Capital, Artis Capital Management Total equity financing raised: $35M Despite claiming to be the largest independent ad exchange and at one time being seen as a serious competitor to Google Adwords, it seems that they were unable to make enough money or sell the company to potential buyers. via Performance Marketing Insider   

 

Company: Microdisplay Corporation Select VC Investors: Mobius Venture Capital, BlueRun Ventures Total equity financing raised: $33M “We knew that we were entering a mature, competitive market, and that we had a narrow window in which to succeed. We developed a TV with a unique display technology, excellent picture quality and a low cost, and we saw an opportunity. Unfortunately, the recent uncertainty in the TV industry, highlighted by particularly slow sales in May, made it virtually impossible to introduce a new type of projection TV at this time.” via Twice  

 

Company: Cuil Select VC Investors: Tugboat Ventures, Greylock Partners Total equity financing raised: $33M …if it has failed, it’s probably because the name is tough to spell and unintuitive to pronounce (every story about Cuil has to remind you that it’s pronounced “cool”), and because it couldn’t live up to its hyperbolic claims of outperforming Google. via Switched    

 

Company: TrueSAN Networks Select VC Investors: JT Venture Partners, Spring Creek Partners Total equity financing raised: $30M …a turnaround plan that founder and CEO Tom Isakovich presented to its board of directors last week failed to convince the company’s backers to stump up more cash. via Network Computing  

 

Company: Asempra Technologies Select VC Investors: US Venture Partners, Polaris Partners Total equity financing raised: $29M Why did Asempra cease trading – which, by the way, happened so fast its PR agency knew nothing of the asset sale to Bakbone? The probability is that it ran into cash flow problems in the recession and the investing VCaps were reluctant to go through another funding round. Three million dollars does not look like anywhere a worthwhile exit strategy for the three VC firms, not with $29m in the Asempra can, but it is something to pull out of the failed venture. via The Register    

 

Company: Entellium Select VC Investors: Ignition Partners, Sigma Partners Total equity financing raised: $28M Just because you run a private company that does not have to file quarterly financial statements with the SEC does not make it okay to cook your books. The CEO and CFO of Seattle-based CRM firm Entellium found that out the hard way. They were arrested by the FBI earlier this week for inflating their revenues and then lying to their board about it. The company appears to be toast. via TechCrunch  

 

Company: Bling Nation Select VC Investors: Meck and Camp Ventures, Lightspeed Venture Partners Total equity financing raised: $28M Executives at several banks said that they liked Bling Nation’s business strategy but its service ultimately suffered from a lack of merchant adoption and consumers’ unwillingness to switch from bank-issued debit cards. via American Banker   

 

Company: NebuAd Select VC Investors: Menlo Ventures and Sierra Ventures Total equity financing raised: $31.6M  The company, which has occassionally been described as the ‘US version of Phorm’, has been dying a slow death since US authorities forced the company to abandon its targeting practices with local internet service providers in September. NebuAd was sued in November 2008 by US web users, who alleged the company violated privacy rights by purchasing information about their web activity from ISPs, using the data to serve targeted ads. The company was investigated for its targeting practices, which included the purchase of detailed web history from broadband providers, including search queries and browsing habits. NebuAd argued that it did not know the web users names, phone numbers, home addresses or IP addresses and gave users the option to opt out of the service. After being grilled in US Congress, NebuAd chief executive and founder Bob Dykes quit the company, shedding a number of staff and its PR firm in his wake, including staff from its offices in the UK. via Marketing Magazine   

 

Company: LV Sensors Select VC Investors: US Venture Partners, Mayfield Fund Total equity financing raised: $27M  …the company closed its doors in the spring after failing to raise a new round of capital. . . Though many sectors have been under pressure as venture funding is harder to get than it was a year ago, chip companies have been especially hard hit due to their high capital needs and the many years it can take to move beyond the development stage. via Wall Street Journal Total Funding: Below $25M   

 

Company: GigaOm Select VC Investors: True Ventures, Alloy Venture Total equity financing raised: $22M  For its eight years of life Gigaom never turned in an annual profit. Many other VC-funded publishers are in a similar position. via The Guardian  

 

Company: Procket Networks Select VC Investors: New Enterprise Associates, Institutional Venture Partners Total equity financing raised: $20M  Since introducing its products more than a year ago, Procket has only a handful of customers, mostly including universities and small carriers. Its most prominent customer is NTT in Japan, which also uses Cisco and Juniper gear. It has yet to announce a major deal in the North American market. via CNET  

Company: Prismatic Select VC Investors: Accel Partners, Breyer Capital, Battery Ventures Total equity financing raised: $16.2M “Four years ago, we set out to build a personalized news reader that would change the way people consume content,” the Prismatic team wrote in a blog post. “For many of you, we did just that. But we also learned content distribution is a tough business and we’ve failed to grow at a rate that justifies continuing to support our Prismatic News products.” via VentureBeat   Company: Top 10 Select VC Investors: Balderton Capital, Accel Partners Total equity financing raised: $12.4M  The hotel industry is particularly challenging given the size, reach and budgets of the big players. At Top10 we did an amazing job innovating in this tough space, but ultimately the competitive landscape made it too expensive for us to scale, and for that reason we decided to close the company. via Business Insider  

 

Company: Daptiv Select VC Investors: Bay Partners, Kennet Partners Total equity financing raised: $24.7M “Everyone thought there was an opportunity to take this company and jump it up, and operate it at a higher level and grow in a different direction,” Franklin said at the time. “We made a good attempt at that and ultimately just weren’t able to raise money around that opportunity.” via Puget Sound Business Journal  

 

Company: RatePoint Select VC Investors: .406 Ventures, Prism VentureWorks Total equity financing raised: $24.5M RatePoint was venture capital funded. According to a press release back in 2009, the company reported at the time that it had “closed a $10 million Series B round of funding led by Castile Ventures of Waltham, Mass., with participation by existing investors .406 Ventures and Prism VentureWorks.” Which goes to show … venture funding is no guarantee of business success. via Small Business Trends  

 

Company: BuyWithMe  Select VC Investors: Bain Capital Ventures, Matrix Partners Total equity financing raised: $21.5M “The capital markets willingness to invest in *daily deal* businesses has dried up. Our game plan was to raise a significant amount of capital to push this comprehensive service offering deeply into markets and, as a result, change the basis of competition in the daily deal space. We were a little late.” via VentureBeat  

 

Company: BusRadio Select VC Investors: Charles River Ventures, Sigma Partners Total equity financing raised: $20.1M The FCC study found that BusRadio, the only commercial broadcaster on school buses, had disguised commercial content as editorial and exposed kids to more commercial content than the four-minutes-per-hour limit it promised parents. . . “What happened was they were unable to get into schools because of parental protests at the local level. Without a really large audience, they were unable to attract significant advertisers.” via Media Life Magazine  

 

Company: Monitor110 Select VC Investors: Acadia Woods Partners, Draper Fisher Jurvetson Total equity financing raised: $16M + $3.5M in debt “We began to raise our next round of funding in May, during one of the most challenging quarters in recent history for VC investments, and despite the progress we have made operationally, we have been unable to secure funding. As a result, the company has decided to cease operations.” via Business Insider  

 

Company: Atrato Select VC Investors: Aweida Venture Partners Total equity financing raised: $18M A big problem at Atrato has been sales. The boxes simply didn’t sell in large enough numbers. . . The new executives couldn’t turn the company around on their own, and by June of this year, it was looking for new funding and what was called a rebirth. Up to a quarter of its staff were laid off, and the company’s strategy changed so that Atrato focussed more on software than hardware. It also intended to promote OEM sales more. We understand just 18 employees were left in July 2010. via The Register  

 

Company: Moblyng Select VC Investors: Deep Fork Capital, Mohr Davidow Ventures Total equity financing raised: $17.4M “We did not monetize enough to stay in business,” said [Stewart] Putney. . . Putney said the games have gotten traction, but too late. The company launched its HTML5 games on the Facebook HTML5 mobile platform in mid-October, but the audience started growing in December when time and cash had run out. via VentureBeat   

 

Company: Alice.com Select VC Investors: Kegonsa Capital Partners Total equity financing raised: $13.9M + $3.4M in debt Nacho Somalo, Alice.com’s president for the European Market, said that Alice.es closed due to lack of funding opportunities. Alice.com tried to reorganize its structure, and used the few funding yet available in their Spanish subsidiary to help their growth in the US market. But it seems they have not been able to do so. via BrainSINS  

 

Company: LucidEra  Select VC Investors: Benchmark Capital, Matrix Partners Total equity financing raised: $15.6M According to Kaplan, a LucidEra representative he spoke with characterized the roots of the company, founded in 2005, as being firmly in the “SaaS 1.0″ era. This group of technology innovators had to “build a lot of their own architecture, delivery capabilities, and software-development resources,” Kaplan explains. Companies starting today can leverage platform-as-a-service capabilities and computing power from vendors such as Salesforce.com and Amazon.com, greatly reducing costly upfront capital investments and ongoing operational expenses. “[LucidEra] got caught with the heavy overhead,” Kaplan says, “and they weren’t going to continue to invest.” via Destination CRM  

 

Company: Intrinsic Graphics Select VC Investors: August Capital Total equity financing raised: $12.5M Intrinsic’s board decided on Monday to shut down the company and sell its assets. Intrinsic Graphics, which was founded in 1999 and backed by Sony and others, was running out of cash, according to Thomas. via CNET  

 

Company: Savantis Systems  Select VC Investors: Highland Capital Partners, Star Ventures Total equity financing raised: $12M “We weren’t getting a lot of traction in the marketplace,” Parkinson said. “So we did a fairly detailed audit of the technology from a functional and a technical perspective.” What he found, Parkinson said, is that the product needed more development work to meet the standards of a large corporate data center. In addition, Parkinson said, incumbents had released new products that somewhat addressed the problem, and market research cast doubt on whether large corporations would buy a new product for such a crucial part of their network from a startup. “Given the amount of incremental investment with the uncertain demand, we decided that the best thing to do would be to return the cash to the investors,” he said. via Boston Business Journal  

 

Company: Novafora Select VC Investors: Vertex Venture Capital, Gemini Israel Ventures Total equity financing raised: $12M …the company laid off all 40 employees yesterday at noon, after being unable to attract additional venture capital funding. Existing backers Vertex and Gemini Israel Funds apparently opted against another large investment, and no new firm stepped up.  “VC appetite has really dried up for later-stage semiconductor companies,” says a former Novafora executive, reached at his home this morning. “They all want to do social networking and things like that.” via peHUB  

 

Company: Renkoo Select VC Investors: Maveron, Matrix Partners Total equity financing raised: $12M Our burn was low and we raised a total of $9 million. We were not in any danger of running out of money. But a combination of no mission, the hostile economic environment of 2008′s downturn, and the uncertainty of the Facebook platform itself, gave us no real reason to keep going as a company. via Quora  

 

Company: JellyCloud Select VC Investors: US Venture Partners, Crosslink Capital Total equity financing raised: $11.5M The company realized that there were too many ad networks out there, and with the souring outlook for advertising, it made better sense to close shop and sell the company’s extensive set of patents, the source said. via VentureBeat  

 

Company: ParaScale Select VC Investors: Menlo Ventures, Charles River Ventures Total equity financing raised: $11.4M ParaScale, which gained $11.37 million first-round funding in 2008, failed to get second-round funding in June this year. At the time, founder and chief technology officer Cameron Bahar said: “We have a rock star team, and a tough situation to deal with. Wish us luck.” via The Register  

 

Company: Songbird Select VC Investors: Sequoia Capital, Atlas Venture Total equity financing raised: $11M Songbird, an early digital music service that aimed to compete against the iTunes, Pandoras and Spotifies of this world with an open source platform, is shutting down on June 28, after running out of money and failing to find a buyer. . . A post in Digital Trends on the closure notes that a sale of the company had fallen through at the last minute. via TechCrunch   

 

Company: DigiScents Select VC Investors: Cyberworks Ventures Total equity financing raised: $10M  Among the problems that Digi-Scents faced was trying to market a service that required consumers to acquire another piece of hardware, say observers. “It’s case of ‘just because you can something on the web doesn’t mean you should,’” says David Taylor, senior vice president of consultants Operon Partners. “The complexity of a technology-driven product makes it a real expensive value proposition.” via Internet Retailer  

 

Company: Arcwave Select VC Investors: Mayfield Fund, SBV Venture Partners Total equity financing raised: $10.3M While calling Arcwave “the undisputed leader in providing wireless plant extension solutions to the cable operators,” [CEO Bill] Sickler conceded that “this market did not develop to the extent necessary to sustain a small company like Arcwave. He added that cable operators “have been slow to pursue the commercial services segment where Arcwave products are applicable. With neither strong revenue growth nor belief from investors and strategic partners that the market will become attractive any time soon, Arcwave has had no choice but to terminate operations.” via Light Reading  

 

Company: EcoMom Select VC Investors: 500 Startups, Rhodium Ventures Total equity financing raised: $10.2M Just two and a half weeks after founder and CEO Jody Sherman stunned the tech community by taking his own life, Ecomom will be shutting down and liquidating all its assets. . . “Everyone was surprised to discover the precipitous increase in losses over the past 2-3 months. The company’s liabilities appear to be greater than its assets and this financial burden makes it difficult to continue down the current path. In light of recent events, given the $1 million securitized bank note and the company’s dwindling cash position, the board has been in discussions with the bank to determine the next steps. Without a current prospect of further cash infusion into the company, the bank will likely ask to sweep most of the company’s cash very soon and take steps to liquidate the remaining inventory and sell assets to pay off the bank debt. At this point, it appears that the company has no other choice than to wind-down the business.” via Pando

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Stop brainstorming and start sprinting 

Stop brainstorming and start sprinting  | Innovating in an Age of Personalization | Scoop.it

For years, people have told us to that group brainstorms don’t work. Here are well-written articles on the topic from 2010, 2011, 2012, 2013, 2014, and 2015. And this isn’t some recent trend—half of those articles cite a 1958 Yale study which found that individuals working on their own are emphatically better at problem-solving than teams of brainstormers. 
And yet, we keep right on brainstorming. We have a problem to solve, we have a group of people, and somebody says, “Let’s brainstorm a few ideas.” We can’t resist. 
Right now, you’re reading 2016’s anti-brainstorming article. But this time, you’re going to change your ways. No, really! This time, I’ve got something much better to offer you: a sprint. 
But first, I need to admit something: I am a recovering group brainstormer myself.

A brief history of the design sprint
Back in 2008, when I worked at Google, I ran a lot of group brainstorms. For a long time, I’d been interested in helping people be more productive and effective at work. Structured group brainstorming seemed perfect. After all, people brainstormed already—why not teach them how to do it properly? When engineers followed the classic rules (defer judgment, encourage wild ideas, and so on), they were able to generate stacks of solutions. Not only that, they enjoyed the process.

Then one day, in the midst of a 100 person training workshop, an engineer stood up and loudly interrupted me: “How do you know group brainstorming actually works?” 

I didn’t have an answer. And at that moment, I realized how foolish I’d been. 

Later, spurred by doubt, I reviewed the outcomes of the workshops I’d run. What happened in the weeks and months after each brainstorm? The results were depressing. Not a single new idea generated in the brainstorms had been built or launched. The best ideas—the solutions that teams actually executed—came from individual work. 

I was still convinced that teamwork was important. Teams provide a variety of skills and expertise, as well as conflicting opinions—all healthy ingredients for success. And I still believed that teams could do better work—and do it faster—if they had a method to follow. I wanted to come up with something that did work. I decided that if I wanted a great problem-solving process, I’d have to make one from scratch, and I’d have to build it on individual work.

So I started over. Teams at Google were open to experimentation (and willing to forgive my mistakes!) By 2010, I’d come up with an alternative: a five day process that I called a design “sprint”. I ran problem-solving sprints with teams like Gmail, Google X, and Google Search. This time, the process worked. The output of the sprints made it into real products.

In 2012, I went to work at Google Ventures (now called GV), and there—with the help of my partners—I’ve run over one hundred sprints with startups in fields as diverse as healthcare, farming, and robotics. 

The big idea of the sprint is to take a small team, clear the schedule for a week, and rapidly progress from problem to tested solution. On Monday, you make a map of the problem. On Tuesday, each individual sketches solutions. On Wednesday, you decide which sketches are strongest. On Thursday, you build realistic a prototype. And on Friday, you test that prototype with five target customers. It’s like fast-forwarding into the future to see your finished product in the market. 

Four big fixes

In my experience, there are four major problems with group brainstorms. When I designed the sprint process, I built in steps to address each one.

1. Brainstorm problem: Shallow ideas from the group

In a group brainstorm, ideas are shouted out loud, rapid fire. The goal is quantity, with the assumption that there will be diamonds among the coal. But details matter, and good ideas require time for deep thought.

Sprint solution: Detailed ideas from individuals

In a sprint, each individual considers several approaches, then spends an hour or more sketching their solution. In the end, there are fewer solutions than in a group brainstorm, but each one is opinionated, unique, and highly detailed. 

2. Brainstorm problem: Personality outshines content

If somebody has a reputation for being smart or creative, their ideas are frequently overvalued. And a group brainstorm can be a nightmare for an introvert. Charismatic extroverts who gives great sales pitches often dominate.

Sprint solution: Ideas stand on their own

The sketches in a sprint don’t have the creator’s name on them. And when we critique them on Wednesday, the creator remains silent and anonymous, saving any sales pitch until after everyone else has given their opinions.

3. Brainstorm problem: Groupthink

The collaborative, encouraging environment of a brainstorm feels good, but often leads teams to talk themselves into watered-down solutions.

Sprint solution: Opinionated decisions

In a sprint, decisions are made by one person: the Decider. The Decider is a CEO, executive, product manager, or other leader. For example, in a sprint with Medium, the Decider was founder Ev Williams; in a sprint with a cancer data company called Flatiron Health, the Decider was Chief Medical Officer Amy Abernethy. With the Decider in the room making all the calls, the winning solutions stay opinionated.

4. Brainstorm problem: No results

Worst of all, brainstorms result in a pile of sticky notes—and nothing else. It’s a loose methodology to begin with, and there is no map to get you from abstract idea to concrete implementation.

Sprint solution: A prototype and data, every time

The sprint process requires your team to build a prototype and test it. By the time you’re done, you have clarity about what to do next.

To give you an idea of how this works, I’ll tell you about a sprint we did with the team at Slack. (If you’re not familiar with Slack, it’s messaging software for teams.) Slack wanted to improve first-time customers’ experience with the product. In the sprint, one person sketched a very clever and ambitious solution—the kind of bold creativity we normally associate with brainstorms. Someone else sketched a traditional approach, but spent a lot of time thinking through the text and steps. It wasn’t flashy, but it was logical and clear. Out of ten competing solutions, those two rose to the top. 

So what happened? Slack prototyped both solutions and put them to the test. In the end, it turned out that the boring, traditional approach was the clear winner—it actually explained the product to customers. In a group brainstorm, that idea might never have been noticed, and even if it had, it likely would have remained as a sticky note. The sprint helped Slack consider multiple solutions and make a decision informed by data. 

It’s hard to stop brainstorming. I know this as well as anyone—despite all my talk, I slip into brainstorm mode at least once a week, blurting out ideas and giving a sales pitch before anyone has a chance to speak. Heck, “brainstorm” is even fun to say—it sounds smart and fast (in fact, the word was coined by an advertising executive). 

But when an important challenge comes along, you owe it to yourself and your team to make better use of your time. Give a sprint a chance. You can find out more about the process at gv.com/sprint, or in my new book, Sprint. Check it out—and may 2016 be the last year you have to read this article.

Linda Holroyd's insight:

This article makes me a believer in the sprint over the brainstorm

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Things Science Says Will Make You Much Happier

Things Science Says Will Make You Much Happier | Innovating in an Age of Personalization | Scoop.it

It’s no secret that we’re obsessed with happiness. After all, the “pursuit of happiness” is even enshrined in the Declaration of Independence. But happiness is fleeting. How can we find it and keep it alive?

Psychologists at the University of California have discovered some fascinating things about happiness that could change your life.

Dr. Sonja Lyubomirsky is a psychology professor at the Riverside campus who is known among her peers as “the queen of happiness.” She began studying happiness as a grad student and never stopped, devoting her career to the subject.

One of her main discoveries is that we all have a happiness “set point.” When extremely positive or negative events happen—such as buying a bigger house or losing a job—they temporarily increase or decrease our happiness, but we eventually drift back to our set point.

The breakthrough in Dr. Lyubomirsky’s research is that you can make yourself happier—permanently. Lyubomirsky and others have found that our genetic set point is responsible for only about 50% of our happiness, life circumstances affect about 10%, and a whopping 40% is completely up to us. The large portion of your happiness that you control is determined by your habits, attitude, and outlook on life.

"Happiness depends upon ourselves." -Aristotle

Even when you accomplish something great, that high won’t last. It won’t make you happy on its own; you have to work to make and keep yourself happy.

Your happiness, or lack thereof, is rooted in your habits. Permanently adopting new habits—especially those that involve intangibles, such as how you see the world—is hard, but breaking the habits that make you unhappy is much easier.

There are numerous bad habits that tend to make us unhappy. Eradicating these bad habits can move your happiness set point in short order.

Immunity to awe. Amazing things happen around you every day if you only know where to look. Technology has exposed us to so much and made the world so much smaller. Yet, there’s a downside that isn’t spoken of much: exposure raises the bar on what it takes to be awestricken. And that’s a shame, because few things are as uplifting as experiencing true awe. True awe is humbling. It reminds us that we’re not the center of the universe. Awe is also inspiring and full of wonder, underscoring the richness of life and our ability to both contribute to it and be captivated by it. It’s hard to be happy when you just shrug your shoulders every time you see something new.

Isolating yourself. Isolating yourself from social contact is a pretty common response to feeling unhappy, but there’s a large body of research that says it’s the worst thing you can do. This is a huge mistake, as socializing, even when you don’t enjoy it, is great for your mood. We all have those days when we just want to pull the covers over our heads and refuse to talk to anybody, but the moment this becomes a tendency, it destroys your mood. Recognize that when unhappiness is making you antisocial, you need to force yourself to get out there and mingle. You’ll notice the difference right away.

Blaming. We need to feel in control of our lives in order to be happy, which is why blaming is so incompatible with happiness. When you blame other people or circumstances for the bad things that happen to you, you’ve decided that you have no control over your life, which is terrible for your mood.

Controlling. It’s hard to be happy without feeling in control of your life, but you can take this too far in the other direction by making yourself unhappy through trying to control too much. This is especially true with people. The only person you can control in your life is you. When you feel that nagging desire to dictate other people’s behavior, this will inevitably blow up in your face and make you unhappy. Even if you can control someone in the short term, it usually requires pressure in the form of force or fear, and treating people this way won’t leave you feeling good about yourself.

Criticizing. Judging other people and speaking poorly of them is a lot like overindulging in a decadent dessert; it feels good while you’re doing it, but afterwards, you feel guilty and sick. Sociopaths find real pleasure in being mean. For the rest of us, criticizing other people (even privately or to ourselves) is just a bad habit that’s intended to make us feel better about ourselves. Unfortunately, it doesn’t. It just creates a spiral of negativity.

Complaining. Complaining is troubling, as well as the attitude that precedes it. Complaining is a self-reinforcing behavior. By constantly talking—and therefore thinking—about how bad things are, you reaffirm your negative beliefs. While talking about what bothers you can help you feel better, there’s a fine line between complaining being therapeutic and it fueling unhappiness. Beyond making you unhappy, complaining drives other people away.

Impressing. People will like your clothes, your car, and your fancy job, but that doesn’t mean they like you. Trying to impress other people is a source of unhappiness, because it doesn’t get to the source of what makes you happy—finding people who like you and accept you for who you are. All the things you acquire in the quest to impress people won’t make you happy either. There’s an ocean of research that shows that material things don’t make you happy. When you make a habit of chasing things, you are likely to become unhappy because, beyond the disappointment you experience once you get them, you discover that you’ve gained them at the expense of the real things that can make you happy, such as friends, family, and taking good care of yourself.

Negativity. Life won’t always go the way you want it to, but when it comes down to it, you have the same 24 hours in the day as everyone else. Happy people make their time count. Instead of complaining about how things could have been or should have been, they reflect on everything they have to be grateful for. Then they find the best solution available to the problem, tackle it, and move on. Nothing fuels unhappiness quite like pessimism. The problem with a pessimistic attitude, apart from the damage it does to your mood, is that it becomes a self-fulfilling prophecy: if you expect bad things, you’re more likely to get bad things. Pessimistic thoughts are hard to shake off until you recognize how illogical they are. Force yourself to look at the facts, and you’ll see that things are not nearly as bad as they seem.

Hanging around negative people. Complainers and negative people are bad news because they wallow in their problems and fail to focus on solutions. They want people to join their pity party so that they can feel better about themselves. People often feel pressure to listen to complainers because they don’t want to be seen as callous or rude, but there’s a fine line between lending a sympathetic ear and getting sucked into their negative emotional spirals. You can avoid getting drawn in only by setting limits and distancing yourself when necessary. Think of it this way: If a person were smoking, would you sit there all afternoon inhaling the second-hand smoke? You’d distance yourself, and you should do the same with negative people. A great way to set limits is to ask them how they intend to fix their problems. The complainer will then either quiet down or redirect the conversation in a productive direction.

You should strive to surround yourself with people who inspire you, people who make you want to be better, and you probably do. But what about the people who drag you down? Why do you allow them to be a part of your life? Anyone who makes you feel worthless, anxious, or uninspired is wasting your time and, quite possibly, making you more like them. Life is too short to associate with people like this. Cut them loose.

Comparing your own life to the lives people portray on social media.The Happiness Research Institute conducted the Facebook Experiment to find out how our social media habits affect our happiness. Half of the study’s participants kept using Facebook as they normally would, while the other half stayed off Facebook for a week. The results were striking. At the end of the week, the participants who stayed off Facebook reported a significantly higher degree of satisfaction with their lives and lower levels of sadness and loneliness. The researchers also concluded that people on Facebook were 55% more likely to feel stress as a result.

The thing to remember about Facebook and social media in general is that they rarely represent reality. Social media provides an airbrushed, color-enhanced look at the lives people want to portray. I’m not suggesting that you give up social media; just take it sparingly and with a grain of salt.

Neglecting to set goals. Having goals gives you hope and the ability to look forward to a better future, and working towards those goals makes you feel good about yourself and your abilities. It’s important to set goals that are challenging, specific (and measurable), and driven by your personal values. Without goals, instead of learning and improving yourself, you just plod along wondering why things never change.

Giving in to fear. Fear is nothing more than a lingering emotion that’s fueled by your imagination. Danger is real. It’s the uncomfortable rush of adrenaline you get when you almost step in front of a bus. Fear is a choice. Happy people know this better than anyone does, so they flip fear on its head. They are addicted to the euphoric feeling they get from conquering their fears.

When all is said and done, you will lament the chances you didn’t take far more than you will your failures. Don’t be afraid to take risks. I often hear people say, “What’s the worst thing that can happen to you? Will it kill you?” Yet, death isn’t the worst thing that can happen to you. The worst thing that can happen to you is allowing yourself to die inside while you’re still alive.

Leaving the present. Like fear, the past and the future are products of your mind. No amount of guilt can change the past, and no amount of anxiety can change the future. Happy people know this, so they focus on living in the present moment. It’s impossible to reach your full potential if you’re constantly somewhere else, unable to fully embrace the reality (good or bad) of the very moment. To live in the moment, you must do two things:

1) Accept your past. If you don’t make peace with your past, it will never leave you and it will create your future. Happy people know that the only good reason to look at the past is to see how far you’ve come.

2) Accept the uncertainty of the future, and don’t place unnecessary expectations upon yourself. Worry has no place in the here and now. As Mark Twain once said,

“Worrying is like paying a debt you don’t owe.”
Bringing It All Together

We can’t control our genes, and we can’t control all of our circumstances, but we can rid ourselves of habits that serve no purpose other than to make us miserable.

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Choose happiness!

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12 ways Google Fiber could trigger the next economic boom

12 ways Google Fiber could trigger the next economic boom | Innovating in an Age of Personalization | Scoop.it

Silicon valley having 1 Gbps Google Fiber to the home have the power to trigger behavioral, social and economic change. But for massive change, the rest of the country will also have to follow suit.

1 Gbps to the home will have a cascading effect across several sectors in the economy. It will force innovation and a new way of thinking and could eventually trigger the next economic boom. Here is how it could :

  1. Increase in 4K/8K content : Availability of more bandwidth will result in proliferation of 4K & 8K content. More pressure on content creators like Netflix to create and publish 4K & soon even 8K content. Japan is already planning to shoot 130 hours of 8K content during the 2016 Olympics. This in turn will create pressure on the regular cable providers and networks to create and publish 4K/8K content.
  2. Increased adoption of 4K/8K TV sets : While 4K TVs are fueling the need for faster bandwidth to home, there is a cyclical effect. When more people have high bandwidth available to download & stream high resolution content, it will in turn increase the demand for 4K and higher resolution TVs. This will cause price on these TVs to come down resulting in even more 4K/8K TV demand.
  3. Acceleration of IoT/IoE : More bandwidth in the last mile means an improved ability for more “Things” & “non-Things” to be able to generate and send more data to the cloud to be analyzed and acted upon. This would accelerate and open up the IoT economy – in turn creating even more data to be transmitted, stored and analyzed.
  4. Extension of the BigData & Analytics wave : More content and more data will increase the need for weeding out the needles in the haystack. Meaning better analytics for targeting the right content to the right user, the right ads to the right user, more accurate predictions and better algorithms for user retention and more importantly user-attention retention and stickiness.
  5. More usage of Cloud storage and services : The above means increased data storage and more capacity of shared Hadoop/SPARK platforms to run that Analytics. Means more cloud storage and services usage. Translates to more innovation and competitive pricing from the major Cloud providers aka Amazon, Google, Microsoft.
  6. Pressure on Internet Providers to upgrade bandwidth : This will of course result in competition among other Cable & Internet Providers to step up and deliver 1Gbps or more at a more economical price. As one can see, Google Fiber announcements have been quickly followed by Verizon FiOS, Comcast GigabitPro & AT&T announcements already. It remains to be seen how the race to rollout and the price to customers workout.
  7. Investment in the Telecom backbone infrastructure : Processing and routing high volume traffic through the internet backbone will result in existing Telecom providers (the Comcasts, AT&Ts, Verizons of the world) to upgrade or add to their capacity.
  8. Innovation in the Telecom infrastructure : This in turn will lead to innovation for higher capacity, bigger, faster boxes and line-card by telecom manufacturers (the Cisco, Juniper, Ericssons of the world). This will also trigger innovation in Network Protocols.
  9. Investment in Data Centers : More higher resolution content means bigger Data centers
  10. Innovation in Data Center cooling : Mark Zuckerberg has already made a conscious effort for low-cost cooling by building a Facebook Data Center close to the Arctic circle while Microsoft is experimenting with under-ocean Data centers using Ocean currents to power the turbines to generate electricity. The need for mammoth data centers with gargantuan cooling needs, with a pressure to keep costs low will lead to such innovative approaches and more innovations in Data Center infrastructure & cooling.
  11. Opening of the Telecom economy (SDN) : Bigger, better boxes cost bigger bucks. But Cable Providers are being pressured to reduce prices. This will create a back-pressure on the manufacturers of the equipment to reduce prices aka margins, there will also be pressure to add lower priced options from the Open network economy (ONF) created by Facebook, Google & other collaborators including several SDN startups. This means several SDN startups will see the light of the day and may boom -  grow stand-alone and/or get acquired by larger giants.
  12. Rekindling the Telecom boom : In any case there will be need for newer/additional Data Center & Network equipment, which would translate to Cisco, Juniper stock prices going up.

Of course, all this won't happen in a day. But the faster Gigabit comes to every home in the US (& the world), the faster the telecom and all related economies will overhaul and boom

Linda Holroyd's insight:

Google Fiber will help us raise the bar

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20 Priceless Lessons Everyone Should Learn in Their 20s

20 Priceless Lessons Everyone Should Learn in Their 20s | Innovating in an Age of Personalization | Scoop.it

20 Priceless Lessons Everyone Should Learn in Their 20s
15-minute meetings can be ultra productive.

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What are the most difficult and useful things people have to learn in their 20s? originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights.

Answer by Nelson Wang, entrepreneur, writer, and founder of ceolifestyle.io, on Quora:

Here are the top 20 things I learned in my twenties:

1. Marry your ideas with execution. Ideas are good. An idea married to execution is better. So you came up with 100 good ideas. That's great. Can you actually make any of them a success?
2. Being able to focus is a skill. When I was in my 20s, I wanted to be a writer, a producer, an actor, a financial analyst, a salesperson, and an entrepreneur. And that was just in the category of careers. Imagine what that list looked like for multitasking my daily activities. As I got older, I realized that our time and energy is incredibly limited each day. Being able to focus is absolutely critical if you want to make a big impact.
3. Perseverance is the most important skill you can learn. You will fail, sometimes over and over again. It's human. No one's perfect. It's not about you fall, but how you get up each time. Did you learn? Did you quit when it made sense? Did you try again? Learn to persevere. I wanted to quit after writing my first book because it was such a flop. Guess what? I continued writing for years and eventually I got published in Forbes, Time, Fortune, Inc and Business Insider. #StayTheCourse.
4. Working hard doesn't guarantee success, but it makes it more likely. Working hard does ensure a few things: you'll learn a lot, you'll develop discipline, and you'll typically see more opportunities. Combine working hard with working smart, and you've got a recipe for success.
5. Work is very personal. You spend about 24% of your time at work your entire life. Bring your whole, authentic self every single day. (This is Sheryl Sandberg's idea). Do you think people say, "Gosh, I love working with Nelson because he's so robotic and shows no emotion or personality." Nope, didn't think so.
6. You don't know everything; learn from others. According to Socrates, "The only true wisdom is in knowing you know nothing." Okay, I think Socrates is kind of right here. Just kind of. I think you know something. But none of us know everything. Leverage the intellectual power of your network and always be insanely curious to learn from others. You never know what incredible knowledge they can share with you. For example, the other day I sat down with a friend for a coffee and learned how he built a business that generated tens of thousands of dollars in sales in a few months with only a few hours of work a week. #MindBlown.
7. An important part of business is setting proper expectations. Learn to let people know in advance what to expect when they work with you. This is half the battle.
8. 15-minute meetings can be ultra productive. Hour-long meetings are almost always too long. Seriously, when's the last time you really had to have a meeting that long to be productive? Try aiming for 15 minutes. It forces you to be concise.
9. You can lead, with or without a title. When I worked at a huge technology company in Silicon Valley, I was an individual contributor. I came up with an innovative idea for generating sales and new customers on my own and soon the word spread about its success. Before you knew it, I was asked by the executive leadership team to present it nationally to the entire team. That's when I realized, leaders lead by inspiring, coaching, and empowering people to be great. You can lead with or without the title.
10. First impressions make a difference. I flew to over 70 cities in 2 years for business. When I wore a hoodie and fell asleep once, the stewardess woke me up and said, "It's time to wake up, teddy bear." I was 29 years old at the time. When I wore a suit (because I had business meetings that same day), people would treat me differently and call me "sir." First impressions make a difference.
11. Time is the most valuable currency. In college I spent an inordinate amount of time playing Mario Kart and partying. Yes, it was fun, but as I've gotten older I realize now how valuable that time was. If I could go back in time, I would spend that time pushing myself to learn, to grow as a person, to spend more quality time with my friends and family, and to even start a business. Also, when I was in my early 20s, I often thought about how to make more money. Money is important. We need it for food, shelter, and clothing. It's absolutely necessary in life. But the most valuable currency is time. Time with our loved ones. Time to live a life we can be proud of. Time is finite. Spend it wisely.
12. Most arguments don't matter. Choose your battles wisely. 13. Most people have a limited amount of social currency.
Sometimes only you can motivate yourself to be great. Sometimes one of your idols can inspire you. Sometimes a family member can get you amped up. Sometimes a love interest can drive you. And sometimes, only you can motivate yourself.
14. Figure out your why. Your purpose will fuel your drive. This is the strongest motivator of all.
15. Have strong opinions, weakly held. I love hearing people talk about their ideas and opinions in a passionate way. It shows they care. I also love it when people realize that there's a better way to do things (even when it's different from their own opinion). Be passionate and be open to changing if there's a better way.
16. Data-driven decisions are powerful. "I think the "subscribe" button on the site should be blue," said the executive. "Why?" replied the marketing manager. "Because, I just think blue will do better." Instead of simply making decisions based on opinion, consider leveraging data to arrive at an answer. For example, an A/B test is a common and great way to find out which variations perform better on a webpage. Embrace testing.
17. Intuition can be just as powerful. Sometimes, though, intuition can be really powerful. When Steve Jobs created the iPhone, he had an incredible sense of what he thought people would want. It reminds me of the quote from Henry Ford: "If I had asked people what they wanted, they would have said faster horses."
18. Your most important investment is in your health. Treat your body well and it will thank you many years later. Eat more fruits and vegetables and exercise regularly. Your energy, focus, and general happiness will improve. My secret to how I got on track with my health? Eating a green smoothie daily for 30 days.
19. Integrity is what you do when no one is looking. But no one will ever know, you think to yourself. Yes, but you always will. And you'll have to live with it. Do the right thing.
20. Love is what really matters. At the end of the day, love is what matters. Love more.
This question originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights.

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Wise and practical advice I wish someone told me when I was in my 20s

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Why I won't give up my Blackberry

Why I won't give up my Blackberry | Innovating in an Age of Personalization | Scoop.it
Why I won't give up my Blackberry
Mar 1, 2016101,346 views182 Likes146 CommentsShare on LinkedInShare on FacebookShare on Twitter
Every day ‎someone questions my Blackberry as the smartphone of choice but I can honestly say that it makes my life easier and me a more productive manager.



It's been a love affair since I first got my blue Blackberry in 2004 (the 6720 with a chrome screen which I'm definitely not nostalgic about). Since then I've easily and fast been able to compose and respond to e-mails wherever and whenever I am on the move without the need to ‎take out my laptop other than for working with documents. Most recently I have a Blackberry Q10 which is without a doubt the best Blackberry ever.

As a manager of a team at Vodafone and later founding and managing Golden Gekko my Blackberry has been a huge productivity booster as I'm always in control of my communication channels. In addition to this I use it to blog, read my daily newsletters, take notes, book and keep track of all my meetings, instant messaging and yes, for phone calls!

So how does the Blackberry improve productivity versus other smartphones?

E-mail and calendar work amazing well and are lightning fast
Type super fast on the physical keyboard without looking, taking notes, writing blogs and other longer texts
The battery always lasts a full day even if the phone is used heavily
It's small and can easily be used with one hand when needed.
The hardware is robust and has never failed me in the last 5 years.
When roaming it uses a minimum amount of data when sending and receiving and messages and no need to turn off other applications
The services are extremely reliable with only one major incident in October 2011
Related to the first point but usability is extremely good with swipes, touch screen and keyboard complementing each other
Core services such as Camera, Calculator, Weather, Whatsapp and Evernote work really well
The lack of distraction from ‎latest games and apps may be related to discipline rather than the device but I'll put it on the list anyway
And yes, I have an iPhone 6S and a Samsung Galaxy S6 with me as backup and to use all the great apps that also improve my daily life.‎ Maybe the combination of two or three phones is the reason that Blackberry remains my primary device. Because if I had to choose one phone then I would probably have to chose the iPhone or Galaxy.

...until very recently that is.



With the Blackberry Priv with a big screen, a keyboard and running Android available since December there might be an-all-in-one-device. I'm still trying it out‎ so will let you know when I've made up my mind.

‎Anyone else that still uses the Blackberry or that wish you could have it back? Let me know so I can add you to the dying bread of Blackberry fans.

About: Magnus Jern is a serial entrepreneur, mobile envangelist, published writer and speaker at conferences around the world. He helps big and small companies succeed in mobile currently serving as President of DMI International (acquired Golden Gekko in 2013). Get in touch with him through Linkedin.
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Much to be said about the old Blackberrys! May current phones rise to those usage, convenience and power standards!

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FountainBlue's March 4 VIP roundtable on the topic of Strategies for Serving a More Demanding, More Diversified Customer Base! Below are notes from the conversation.

  • Leaders from across industries, roles and sectors are impacted by a more empowered and informed customer base, and responding in many different ways. 
  • The pace of change has escalated, and the demands of the customers are elevated, which impacts the products and services offered and the processes and communications necessary to ensure smooth delivery and scale of growth and response.
  • Hardware will continue to get commoditized, and the value will be on the software and services side of the equation. 
  • Customers are becoming progressively more empowered because of their access to information, the immediacy of access to information, the wide and broad availability of mobile devices, the social online networks, etc., Hence we are evolving from an age of information to an age of the customer, and leaders and companies who acknowledge and work with this trend will be more likely to benefit from it.
  • Digitizing front end functions has gotten more standardized, but there's still a great need to digitize the middle and back end processes, especially for non-tech industries. We need to support customers in being more agile, more flexible, and more scalable. See CBInsights March 3, 2016 report on digitization opportunities for start-ups.  CBI Digitization Opportunities, March 3, 2016

Below is advice on how to better serve a demanding customer base.

  • Ihe Age of the Customer, know what is nice-to-have, and what they need-to-have. It's easier to sell one than the other.
  • When customers are deciding whether to engage, they are considering is it easier and cheaper to solve the problem or live with the problem, so plan your offerings and pricing accordingly.
  • The consumer is demanding quality products and services which area tailored to their needs. These customers are also in general more mindful of the earth and humanity, so organic and sustainable products and processes will be favored progressively more.
  • Technologists need to work hand-in-hand with experts in non-technical fields in collaboration to meet the personalized needs of the consumer.
  • Whereas before, business units and teams might have been isolated and siloed in working with customers, a more collaborative, coordinated communication and strategy is now necessary to better understand the current and future needs of the customer.
  • There's a trend toward selling to business unit managers and users more, even if the product is for an extremely technical audience. In other words, the user may not be the decision-maker, and the sales person needs to talk to both the decision-maker and the user to complete a sale.
  • Data will remain important, of course. Be the type of leader who can translate what the data is saying to create a strategy and plan on how to better serve customers, better expand offerings.
  • We will continue to progress toward pay-as-you-go functionality for a wide range of functions. Communicating clearly to customers and walking them through the adoption curve will help them help themselves in maintaining, supporting and tailoring their own solutions. 

Below are some predictions for opportunities ahead.

  • There's a push pull between the need for security, access and privacy, and there's an opportunity for organizations to provide innovative solutions for a broad and wide audience in this space.
  • There will be a continued trend toward 'freemium' services as the new normal.
  • Interactive solutions which allow customers to learn by doing through simulations provides a huge opportunity to train and educate workers.
  • There will be a trend toward more collaborative, consultative selling by experienced enterprise professionals working with engaged customers to build and iterate use cases.
  • There will be a trend toward paying customers for their aggregated usage data.

Recommended Resources:

  • Pretotype Labs is a PDF ebook which helps entrepreneurs and execs really understand and focus on what the customers want www.pretotypelabs.com
  • AYTM (Ask Your Target Market www.aytm.com) allows entrepreneurs and execs to send tailored surveys to specific target audiences for small amounts of money.
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The eight essentials of innovation | McKinsey & Company

The eight essentials of innovation | McKinsey & Company | Innovating in an Age of Personalization | Scoop.it

It’s no secret: innovation is difficult for well-established companies. By and large, they are better executors than innovators, and most succeed less through game-changing creativity than by optimizing their existing businesses.

Innovation and creativity
In this engaging presentation, McKinsey principal Nathan Marston explains why innovation is increasingly important to driving corporate growth and brings to life the eight essentials of innovation performance.

Yet hard as it is for such organizations to innovate, large ones as diverse as Alcoa, the Discovery Group, and NASA’s Ames Research Center are actually doing so. What can other companies learn from their approaches and attributes? That question formed the core of a multiyear study comprising in-depth interviews, workshops, and surveys of more than 2,500 executives in over 300 companies, including both performance leaders and laggards, in a broad set of industries and countries (Exhibit 1). What we found were a set of eight essential attributes that are present, either in part or in full, at every big company that’s a high performer in product, process, or business-model innovation.

Since innovation is a complex, company-wide endeavor, it requires a set of crosscutting practices and processes to structure, organize, and encourage it. Taken together, the essentials described in this article constitute just such an operating system, as seen in Exhibit 2. These often overlapping, iterative, and nonsequential practices resist systematic categorization but can nonetheless be thought of in two groups. The first four, which are strategic and creative in nature, help set and prioritize the terms and conditions under which innovation is more likely to thrive. The next four essentials deal with how to deliver and organize for innovation repeatedly over time and with enough value to contribute meaningfully to overall performance.

Exhibit 1
Exhibit 2

To be sure, there’s no proven formula for success, particularly when it comes to innovation. While our years of client-service experience provide strong indicators for the existence of a causal relationship between the attributes that survey respondents reported and the innovations of the companies we studied, the statistics described here can only prove correlation. Yet we firmly believe that if companies assimilate and apply these essentials—in their own way, in accordance with their particular context, capabilities, organizational culture, and appetite for risk—they will improve the likelihood that they, too, can rekindle the lost spark of innovation. In the digital age, the pace of change has gone into hyperspeed, so companies must get these strategic, creative, executional, and organizational factors right to innovate successfully.

Aspire

President John F. Kennedy’s bold aspiration, in 1962, to “go to the moon in this decade” motivated a nation to unprecedented levels of innovation. A far-reaching vision can be a compelling catalyst, provided it’s realistic enough to stimulate action today.

But in a corporate setting, as many CEOs have discovered, even the most inspiring words often are insufficient, no matter how many times they are repeated. It helps to combine high-level aspirations with estimates of the value that innovation should generate to meet financial-growth objectives. Quantifying an “innovation target for growth,” and making it an explicit part of future strategic plans, helps solidify the importance of and accountability for innovation. The target itself must be large enough to force managers to include innovation investments in their business plans. If they can make their numbers using other, less risky tactics, our experience suggests that they (quite rationally) will.

Establishing a quantitative innovation aspiration is not enough, however. The target value needs to be apportioned to relevant business “owners” and cascaded down to their organizations in the form of performance targets and timelines. Anything less risks encouraging inaction or the belief that innovation is someone else’s job.

For example, Lantmännen, a big Nordic agricultural cooperative, was challenged by flat organic growth and directionless innovation. Top executives created an aspirational vision and strategic plan linked to financial targets: 6 percent growth in the core business and 2 percent growth in new organic ventures. To encourage innovation projects, these quantitative targets were cascaded down to business units and, ultimately, to product groups. During the development of each innovation project, it had to show how it was helping to achieve the growth targets for its category and markets. As a result, Lantmännen went from 4 percent to 13 percent annual growth, underpinned by the successful launch of several new brands. Indeed, it became the market leader in premade food only four years after entry and created a new premium segment in this market.

Such performance parameters can seem painful to managers more accustomed to the traditional approach. In our experience, though, CEOs are likely just going through the motions if they don’t use evaluations and remuneration to assess and recognize the contribution that all top managers make to innovation.

Choose

Fresh, creative insights are invaluable, but in our experience many companies run into difficulty less from a scarcity of new ideas than from the struggle to determinewhich ideas to support and scale. At bigger companies, this can be particularly problematic during market discontinuities, when supporting the next wave of growth may seem too risky, at least until competitive dynamics force painful changes.

Innovation is inherently risky, to be sure, and getting the most from a portfolio of innovation initiatives is more about managing risk than eliminating it. Since no one knows exactly where valuable innovations will emerge, and searching everywhere is impractical, executives must create some boundary conditions for the opportunity spaces they want to explore. The process of identifying and bounding these spaces can run the gamut from intuitive visions of the future to carefully scrutinized strategic analyses. Thoughtfully prioritizing these spaces also allows companies to assess whether they have enough investment behind their most valuable opportunities.

During this process, companies should set in motion more projects than they will ultimately be able to finance, which makes it easier to kill those that prove less promising. RELX Group, for example, runs 10 to 15 experiments per major customer segment, each funded with a preliminary budget of around $200,000, through its innovation pipeline every year, choosing subsequently to invest more significant funds in one or two of them, and dropping the rest. “One of the hardest things to figure out is when to kill something,” says Kumsal Bayazit, RELX Group’s chief strategy officer. “It’s a heck of a lot easier if you have a portfolio of ideas.”

Once the opportunities are defined, companies need transparency into what people are working on and a governance process that constantly assesses not only the expected value, timing, and risk of the initiatives in the portfolio but also its overall composition. There’s no single mix that’s universally right. Most established companies err on the side of overloading their innovation pipelines with relatively safe, short-term, and incremental projects that have little chance of realizing their growth targets or staying within their risk parameters. Some spread themselves thinly across too many projects instead of focusing on those with the highest potential for success and resourcing them to win.

These tendencies get reinforced by a sluggish resource-reallocation process. Our research shows that a company typically reallocates only a tiny fraction of its resources from year to year, thereby sentencing innovation to a stagnating march of incrementalism.1

Discover

Innovation also requires actionable and differentiated insights—the kind that excite customers and bring new categories and markets into being. How do companies develop them? Genius is always an appealing approach, if you have or can get it. Fortunately, innovation yields to other approaches besides exceptional creativity.

The rest of us can look for insights by methodically and systematically scrutinizing three areas: a valuable problem to solve, a technology that enables a solution, and a business model that generates money from it. You could argue that nearly every successful innovation occurs at the intersection of these three elements. Companies that effectively collect, synthesize, and “collide” them stand the highest probability of success. “If you get the sweet spot of what the customer is struggling with, and at the same time get a deeper knowledge of the new technologies coming along and find a mechanism for how these two things can come together, then you are going to get good returns,” says Alcoa chairman and chief executive Klaus Kleinfeld.

The insight-discovery process, which extends beyond a company’s boundaries to include insight-generating partnerships, is the lifeblood of innovation. We won’t belabor the matter here, though, because it’s already the subject of countless articles and books.2One thing we can add is that discovery is iterative, and the active use of prototypes can help companies continue to learn as they develop, test, validate, and refine their innovations. Moreover, we firmly believe that without a fully developed innovation system encompassing the other elements described in this article, large organizations probably won’t innovate successfully, no matter how effective their insight-generation process is.

Evolve

Business-model innovations—which change the economics of the value chain, diversify profit streams, and/or modify delivery models—have always been a vital part of a strong innovation portfolio. As smartphones and mobile apps threaten to upend oldline industries, business-model innovation has become all the more urgent: established companies must reinvent their businesses before technology-driven upstarts do. Why, then, do most innovation systems so squarely emphasize new products? The reason, of course, is that most big companies are reluctant to risk tampering with their core business model until it’s visibly under threat. At that point, they can only hope it’s not too late.

Leading companies combat this troubling tendency in a number of ways. They up their game in market intelligence, the better to separate signal from noise. They establish funding vehicles for new businesses that don’t fit into the current structure. They constantly reevaluate their position in the value chain, carefully considering business models that might deliver value to priority groups of new customers. They sponsor pilot projects and experiments away from the core business to help combat narrow conceptions of what they are and do. And they stress-test newly emerging value propositions and operating models against countermoves by competitors.

Amazon does a particularly strong job extending itself into new business models by addressing the emerging needs of its customers and suppliers. In fact, it has included many of its suppliers in its customer base by offering them an increasingly wide range of services, from hosted computing to warehouse management. Another strong performer, the Financial Times, was already experimenting with its business model in response to the increasing digitalization of media when, in 2007, it launched an innovative subscription model, upending its relationship with advertisers and readers. “We went against the received wisdom of popular strategies at the time,” says Caspar de Bono, FT board member and managing director of B2B. “We were very deliberate in getting ahead of the emerging structural change, and the decisions turned out to be very successful.” In print’s heyday, 80 percent of the FT’s revenue came from print advertising. Now, more than half of it comes from content, and two-thirds of circulation comes from digital subscriptions.

Accelerate

Virulent antibodies undermine innovation at many large companies. Cautious governance processes make it easy for stifling bureaucracies in marketing, legal, IT, and other functions to find reasons to halt or slow approvals. Too often, companies simply get in the way of their own attempts to innovate. A surprising number of impressive innovations from companies were actually the fruit of their mavericks, who succeeded in bypassing their early-approval processes. Clearly, there’s a balance to be maintained: bureaucracy must be held in check, yet the rush to market should not undermine the cross-functional collaboration, continuous learning cycles, and clear decision pathways that help enable innovation. Are managers with the right knowledge, skills, and experience making the crucial decisions in a timely manner, so that innovation continually moves through an organization in a way that creates and maintains competitive advantage, without exposing a company to unnecessary risk?

Companies also thrive by testing their promising ideas with customers early in the process, before internal forces impose modifications that blur the original value proposition. To end up with the innovation initially envisioned, it’s necessary to knock down the barriers that stand between a great idea and the end user. Companies need a well-connected manager to take charge of a project and be responsible for the budget, time to market, and key specifications—a person who can say yes rather than no. In addition, the project team needs to be cross-functional in reality, not just on paper. This means locating its members in a single place and ensuring that they give the project a significant amount of their time (at least half) to support a culture that puts the innovation project’s success above the success of each function.

Cross-functional collaboration can help ensure end-user involvement throughout the development process. At many companies, marketing’s role is to champion the interests of end users as development teams evolve products and to help ensure that the final result is what everyone first envisioned. But this responsibility is honored more often in the breach than in the observance. Other companies, meanwhile, rationalize that consumers don’t necessarily know what they want until it becomes available. This may be true, but customers can certainly say what they don’t like. And the more quickly and frequently a project team gets—and uses—feedback, the more quickly it gets a great end result.

Scale

Some ideas, such as luxury goods and many smartphone apps, are destined for niche markets. Others, like social networks, work at global scale. Explicitly considering the appropriate magnitude and reach of a given idea is important to ensuring that the right resources and risks are involved in pursuing it. The seemingly safer option of scaling up over time can be a death sentence. Resources and capabilities must be marshaled to make sure a new product or service can be delivered quickly at the desired volume and quality. Manufacturing facilities, suppliers, distributors, and others must be prepared to execute a rapid and full rollout.

For example, when TomTom launched its first touch-screen navigational device, in 2004, the product flew off the shelves. By 2006, TomTom’s line of portable navigation devices reached sales of about 5 million units a year, and by 2008, yearly volume had jumped to more than 12 million. “That’s faster market penetration than mobile phones” had, says Harold Goddijn, TomTom’s CEO and cofounder. While TomTom’s initial accomplishment lay in combining a well-defined consumer problem with widely available technology components, rapid scaling was vital to the product’s continuing success. “We doubled down on managing our cash, our operations, maintaining quality, all the parts of the iceberg no one sees,” Goddijn adds. “We were hugely well organized.”

Extend

In the space of only a few years, companies in nearly every sector have conceded that innovation requires external collaborators. Flows of talent and knowledge increasingly transcend company and geographic boundaries. Successful innovators achieve significant multiples for every dollar invested in innovation by accessing the skills and talents of others. In this way, they speed up innovation and uncover new ways to create value for their customers and ecosystem partners.

Smart collaboration with external partners, though, goes beyond merely sourcing new ideas and insights; it can involve sharing costs and finding faster routes to market. Famously, the components of Apple’s first iPod were developed almost entirely outside the company; by efficiently managing these external partnerships, Apple was able to move from initial concept to marketable product in only nine months. NASA’s Ames Research Center teams up not just with international partners—launching joint satellites with nations as diverse as Lithuania, Saudi Arabia, and Sweden—but also with emerging companies, such as SpaceX.

High-performing innovators work hard to develop the ecosystems that help deliver these benefits. Indeed, they strive to become partners of choice, increasing the likelihood that the best ideas and people will come their way. That requires a systematic approach. First, these companies find out which partners they are already working with; surprisingly few companies know this. Then they decide which networks—say, four or five of them—they ideally need to support their innovation strategies. This step helps them to narrow and focus their collaboration efforts and to manage the flow of possibilities from outside the company. Strong innovators also regularly review their networks, extending and pruning them as appropriate and using sophisticated incentives and contractual structures to motivate high-performing business partners. Becoming a true partner of choice is, among other things, about clarifying what a partnership can offer the junior member: brand, reach, or access, perhaps. It is also about behavior. Partners of choice are fair and transparent in their dealings.

Moreover, companies that make the most of external networks have a good idea of what’s most useful at which stages of the innovation process. In general, they cast a relatively wide net in the early going. But as they come closer to commercializing a new product or service, they become narrower and more specific in their sourcing, since by then the new offering’s design is relatively set.

Mobilize

How do leading companies stimulate, encourage, support, and reward innovative behavior and thinking among the right groups of people? The best companies find ways to embed innovation into the fibers of their culture, from the core to the periphery.

They start back where we began: with aspirations that forge tight connections among innovation, strategy, and performance. When a company sets financial targets for innovation and defines market spaces, minds become far more focused. As those aspirations come to life through individual projects across the company, innovation leaders clarify responsibilities using the appropriate incentives and rewards.

The Discovery Group, for example, is upending the medical and life-insurance industries in its native South Africa and also has operations in the United Kingdom, the United States, and China, among other locations. Innovation is a standard measure in the company’s semiannual divisional scorecards—a process that helps mobilize the organization and affects roughly 1,000 of the company’s business leaders. “They are all required to innovate every year,” Discovery founder and CEO Adrian Gore says of the company’s business leaders. “They have no choice.”

Organizational changes may be necessary, not because structural silver bullets exist—we’ve looked hard for them and don’t think they do—but rather to promote collaboration, learning, and experimentation. Companies must help people to share ideas and knowledge freely, perhaps by locating teams working on different types of innovation in the same place, reviewing the structure of project teams to make sure they always have new blood, ensuring that lessons learned from success and failure are captured and assimilated, and recognizing innovation efforts even when they fall short of success.

Internal collaboration and experimentation can take years to establish, particularly in large, mature companies with strong cultures and ways of working that, in other respects, may have served them well. Some companies set up “innovation garages” where small groups can work on important projects unconstrained by the normal working environment while building new ways of working that can be scaled up and absorbed into the larger organization. NASA, for example, has ten field centers. But the space agency relies on the Ames Research Center, in Silicon Valley, to maintain what its former director, Dr. Pete Worden, calls “the character of rebels” to function as “a laboratory that’s part of a much larger organization.”

Big companies do not easily reinvent themselves as leading innovators. Too many fixed routines and cultural factors can get in the way. For those that do make the attempt, innovation excellence is often built in a multiyear effort that touches most, if not all, parts of the organization. Our experience and research suggest that any company looking to make this journey will maximize its probability of success by closely studying and appropriately assimilating the leading practices of high-performing innovators. Taken together, these form an essential operating system for innovation within a company’s organizational structure and culture.

About the Authors

Marc de Jong is a principal in McKinsey’s Amsterdam office, Nathan Marston is a principal in the London office, and Erik Roth is a principal in the Shanghai office.

The authors wish to thank Jill Hellman and McKinsey’s Peet van Biljon for their contributions to this article.

Linda Holroyd's insight:

Useful and practical ways to look at/break down the innovation process

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Unlocking the potential of the Internet of Things | McKinsey & Company

Unlocking the potential of the Internet of Things | McKinsey & Company | Innovating in an Age of Personalization | Scoop.it

The Internet of Things—sensors and actuators connected by networks to computing systems—has received enormous attention over the past five years. A new McKinsey Global Institute report, The Internet of Things: Mapping the value beyond the hype, attempts to determine exactly how IoT technology can create real economic value.
Our central finding is that the hype may actually understate the full potential—but that capturing it will require an understanding of where real value can be created and a successful effort to address a set of systems issues, including interoperability.
To get a broader view of the IoT’s potential benefits and challenges across the global economy, we analyzed more than 150 use cases, ranging from people whose devices monitor health and wellness to manufacturers that utilize sensors to optimize the maintenance of equipment and protect the safety of workers. Our bottom-up analysis for the applications we size estimates that the IoT has a total potential economic impact of $3.9 trillion to $11.1 trillion a year by 2025. At the top end, that level of value—including the consumer surplus—would be equivalent to about 11 percent of the world economy (exhibit).
Achieving this kind of impact would require certain conditions to be in place, notably overcoming the technical, organizational, and regulatory hurdles. In particular, companies that use IoT technology will play a critical role in developing the right systems and processes to maximize its value. Among our findings:
Interoperability between IoT systems is critical. Of the total potential economic value the IoT enables, interoperability is required for 40 percent on average and for nearly 60 percent in some settings.
Currently, most IoT data are not used. For example, on an oil rig that has 30,000 sensors, only 1 percent of the data are examined. That’s because this information is used mostly to detect and control anomalies—not for optimization and prediction, which provide the greatest value.
Business-to-business applications will probably capture more value—nearly 70 percent of it—than consumer uses, although consumer applications, such as fitness monitors and self-driving cars, attract the most attention and can create significant value, too.
The IoT has a large potential in developing economies. Still, we estimate that it will have a higher overall value impact in advanced economies because of the higher value per use. However, developing economies could generate nearly 40 percent of the IoT’s value, and nearly half in some settings.
Customers will capture most of the benefits. We estimate that IoT users (businesses, other organizations, and consumers) could capture 90 percent of the value that IoT applications generate. For example, in 2025 remote monitoring could create as much as $1.1 trillion a year in value by improving the health of chronic-disease patients.
A dynamic industry is evolving around IoT technology. As in other technology waves, both incumbents and new players have opportunities. Digitization blurs the lines between technology companies and other types of businesses; makers of industrial machinery, for example, are creating new business models by using IoT links and data to offer their products as a service.
The digitization of machines, vehicles, and other elements of the physical world is a powerful idea. Even at this early stage, the IoT is starting to have a real impact by changing how goods are made and distributed, how products are serviced and refined, and how doctors and patients manage health and wellness. But capturing the full potential of IoT applications will require innovation in technologies and business models, as well as investment in new capabilities and talent. With policy actions to encourage interoperability, ensure security, and protect privacy and property rights, the Internet of Things can begin to reach its full potential—especially if leaders truly embrace data-driven decision making.
About the authors
James Manyika, Jonathan Woetzel, and Richard Dobbs are directors of the McKinsey Global Institute, where Michael Chui is a partner; Peter Bisson is a director in McKinsey’s Stamford office; Jacques Bughin is a director in the Brussels office; and Dan Aharon is a consultant in the New York office.

Linda Holroyd's insight:

Who will execute on the IoT potential? Those who can make products and services standardized and interoperable, those who serve the needs of the customer, those who serve emerging countries

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