Category Archives: Business Model

Retail Disruption. Are Company Executives in Denial and not watching their Frontiers?

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I was at a dairy meeting this week. Senior management of companies from all over the US come together to discuss market trends, regulatory issues and food safety. Their companies make the cheese, yogurt, dairy ingredients and other dairy products that we all eat. It is a highly experienced group from small, medium and large companies.

Normally the audience is very up-to-date and not much surprises them. This time one session really opened their eyes and gasps could be heard.

The speaker was Dan O’Conner from RetailNet Group, as they put it: a leading Global Retail Intelligence Resource helping Retailers and Suppliers plan tomorrow’s strategies today. He showed digital trends and the impact on the dairy business. The audience was silent and in full attention.

Dan spoke about how apps change customer shopping and especially that they “wall off” the users and make competition much more difficult. Apps will become the new loyalty programs.

The growth of customer toolkits that allow for a much more personalized experience and easier click and buy. These toolkits include: product scanning, creation of shopping lists based on scanned products, recipes, coupons and delivery options. The delivery options are getting faster and faster with major emphasis on same day delivery. Amazon is the leader in the retail industry and is forcing the major retailers to rethink everything.

Over time total transparency will be expected by many customers. This includes ability to see ingredients, sustainability of supply, origin of sensitive ingredients, etc. All this will be available through the content of apps. The impact on sourcing of ingredients is considerable.

It is expected that over the next few years volume will shift away from stores and that about 25% of todays volume will take place without store interaction, of that15% will be pick and deliver. This highlights that companies need to provide both web and store channel options (clicks and bricks). The increased cost can be quite significant and a totally new set of employee skills is needed. On top of that, supply chains will become more complex and need to be flexible.

Finally, in all cases the increase of marketplaces changes the dynamics. They have the fastest growth and need to be considered as a source of revenue. However, profitable pricing is more difficult and requires new ways to add value.

For me the reaction of the audience showed that most companies are still in denial of the changes that are happening in their industry. They are not watching the frontiers of their business. Not a good sign. Time to wake up.

Hointer’s Vision Of The Future Of Retail Uses Robots To Put The Focus On Shopping Experience

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Posted by  in TechCrunch

Google Expands Apps Partner Programs With Tech Track, Opens Cloud Partner Program To More Businesses

At this year’s Dx3 digital business expo in Toronto, one of the highlights was a Seattle-based company called Hointer that’s aiming for nothing short of a complete revolution in the way we buy clothes in stores – and it’s using robots to make it happen.If you ask the average guy about their least favorite part of the shopping experience, a good chunk of them are probably going to cite having to deal with overeager sales staff. Customer service is one thing, but feeling harangued by people who go in for the hard sell is something else, and it’s hard sometimes to distinguish between the two.

There’s also the problem that the retail isn’t necessarily what one might call convenient or relaxing: fighting crowds, hunting through disorganized stock, waiting ages in line for check-out. Amazon is succeeding in taking away business from physical retailers, and it’s doing that mostly on the back of providing an experience that doesn’t require anyone to leave the comfort of their own homes.

The retailer's backend on Hointer

Hointer founder Nadia Shouraboura knows a thing or two about Amazon and its retail strategy: she was employee number ten at the Seattle-based tech company. Her new company is heavily tech-focused too, as it uses mobile software, a robotic backend and a development strategy of rapid software prototyping to bring everything together for an entirely new kind of in-store experience.

 “Tons of people come into our storefront in Seattle, and they tell us what they like, and what they don’t like, and they yell,” she explained in an interview, describing how Hointer’s own store works, where developers sit on the show floor and code, replacing traditional customer service reps. “Sometimes if a feature request is really simple, it’ll be in the store the next day, and customers will come back and see that the idea has been implemented. We’ll try 10 ideas a day, and 10 of them are usually dumb, but we try it and then we roll it back.”

The rapid prototyping approach has resulted in a mature sales platform that incorporates barcode scanning via a mobile app, to bring up product information and the ability to order direct from a mobile device, and have that stock waiting for you in a change room. You can order new sizes and reject items instantly, and also pay direct from your device in some versions. This can be handled via a robotic store backend, or done using human support staff, which is a more popular option in emerging markets where labor is cheaper. Even the robotics systems and SaaS solutions for the customer interaction and retail operation management only cost around $40,000 to $50,000 per year to install and get up and running, Hointer tells me.

What consumers expect of in-store shopping is a shifting beast, and stocking shelves with goods isn’t cutting it anymore. People want something not easily replicable via online tools with their modern shopping experience, and Hointer’s systems are designed to handle the basics and free up floor space and retailer time, so that they can focus on better addressing those things they can offer a customer that an online shopping cart can’t.

150 years and going strong. But almost did not make it.

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On November 6th the Philadelphia Inquirer had a story about one of the oldest stores in the USA, the Weitzenkorn’s Mens Clothing store in Pottstown, PA. The store has been in business for over 150 years. Quite an achievement considering the changes in the retail landscape with large box stores, discount offerings, technology changes, clothing trends, etc. These changes in addition to the economic decline of the Pottstown area make it almost a miracle.

The owners were able to overcome all these changes but it was not easy. The arrival of on-line shopping was a hurdle that proved more difficult and ownership contemplated closing the store after the current generation of ownership. The owner’s son saved the day by helping set up an internet presence, including an internet store. Now about 30 percent of sales come over the internet.

The story grabbed my attention since it highlights problems of smaller businesses: How to stay relevant with the changing market place and new technologies? They had been able to read and adjust to the clothing trends very well.  The store has a few things going for it. 1. Quality products with personal attention 2. A broad range of offerings. All this can be translated to the internet but the internet needs to be embraced.  It also requires a different approach and set of skills.  Without the skills of the younger generation it would not have happened. The son was able to make the internet presence matches the store brand and clearly has become a success.

Ownership was hesitant to make the move to the internet but I wonder if they would have done it without a family member.

We know the dangers of disruption so why are we fighting it?

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Excerpts of an article by  in ITBusiness.ca 

October 7th, 2014

So the real question is, why are so many companies not taking the right steps – why are they resisting? Peter Sondergard’s, global head of research for Gartner, answer is simple. “The new digital businesses have lower margins.” Given that, today’s businesses have a difficult challenge. Do they take short term and potentially massive pain and bet on a larger market share with far lower margins. Or do they soldier on believing that somehow they will defy the odds?

There is a second and compelling reason why companies are hesitating to do what they know is inevitable. Digital businesses are different. A digital business may be agile, but to do that it will take risks. Digital businesses are not afraid of failure and risk taking. Yet the mainstay of the enterprise in so many companies from banking to retail to government to manufacturing to natural resources – all of these need “rock solid systems and processing.” When the consequence stoppage in production runs into the millions of dollars, it’s hard to accept failure.

Digital machinists versus digital humanists

Gartner sees this as a conflict between two mind-sets. The “digital machinists” represent the old enterprise with its need for uninterrupted operation and “rock solid” processes. The new thinking of the “digital humanists” runs counter to everything that the “digital machinists” think.

“Digital humanists” are driven by principles not processes. These principles, Sondergard outlined as:

  • People – at the centre of all actions is a concern for human beings and a focus on the user/customer experience.
  • Embracing the unpredictable – where machinists try to control deviations from the norm, humanists exploit these to learn and explore new ways of performing services.
  • Respect for personal space – or in the words of another analyst, humanists don’t do things that are “creepy.”

The challenge of the bi-modal enterprise

Who is right? According to Sondergard, they both are. Companies need the rock solid business processes to exploit current business opportunities but they also need to embrace the humanist ideals to avoid disruption by agile competitors. They need to be bi-modal.  A traditional enterprise may not be able to instantly transform into a start-up, but we can all incubate start-ups within our existing enterprises.

Leading companies get this and are embracing these moves to a new digital first approach on new businesses and services while they defend but gradually scale back their traditional business.

The digital transformation

As Sondergard pointed out, it’s not just businesses that are changing. Technology is changing us as well. There is a power shift happening as we move from physical to digital enterprises. Power is moving from corporation to customer. In enterprise technology, it is moving from structured IT departments and processes to business leaders. It is shifting from enterprise to employee. At every level, power is moving from its existing base to new distributed, decentralize but no longer “de-personalized” model.

As technological change accelerates, it accelerates the power shift to the new “digital humanists.”

The Internet of everything

If you had to look to find one current trend that would show the pace and extent of change, you need look no further than what has been termed the “Internet of everything.” Cisco Systems product marketing manager Beth Barach presented on this topic during the 2014 Gartner Symposium in Orlando.

For those who wondered what the difference was between the Internet of everything (IoE) and the Internet of things (IoT), Barach gave an elegantly simple answer. The Internet of everything is, as the name implies – everything. It is people, process, data and “things.” But the “things” are special. They are not just the devices, they are the sensors that supply the data. In turn, that data runs more and more of our day to day world – transit, homes, office buildings, infrastructures and even our cars – just to name a few areas.

These “things” operate our world and provide the data that controls that world. This is how we benefit from the Internet of everything. The “things’ give us the data and the data drives the rest.

A blessing and a threat

The dirty little secret is about these “things” is that that as they assume more and more control of our businesses and our day to day lives, they also present more and more of a risk. And as they grow in numbers the threat becomes even greater. The more of these devices that exist, the more likely it is that they will be compromised. On a recent TV show, a fictional plot showed a pacemaker being hacked. Gartner estimates in a few years this will be a reality.

Businesses know this too. Cisco’s Barach showed us that 73 per cent of companies expect IoT to cause security threats. Yet by the same data, only 13 per cent of companies feel they are addressing this challenge.

Is it a technical problem? No. It’s a mind-set problem. Like the “digital machinist” and the “digital human” there two distinct mind sets at work – the Information Technologist (IT) and the Operational Technologist (OT) The OT mindset actively pursues the benefits of a proliferation of devices and sensors. The IT mindset sees and tries to mitigate the risks and return the company to the certainty of “rock solid” processes. The OT mindset has no time for this.

The reality is that they are both right in their own respect. According to Cisco’s Barach both are critical to organization success. There is no technological miracle – few if any of these devices and sensors have any security built in. What is needed is a cooperative approach to solve this contradiction – how do you collaborate to build “rock solid” security and still have the agility and ability to harness learning and the “power of serendipity” which is such a part of the digital enterprise?

How to do it in real terms

As Gartner analyst Frank Buytendijk pointed out, this way of thinking is not new. Jim Collins, the guru of modern strategy has said that successful companies had to escape the tyranny of or and embrace the possibility of and.  The only problem, Buytendijk pointed out is that Collins didn’t tell us how to do it.

Two presentations at the Gartner Symposium tackled this in real terms. The first session, led by Richard Hunter another senior Gartner analyst, looked at scenario planning as a way to do strategic planning in a time of uncertainty and ambiguity.

Traditional strategic planning requires that you determine and place a bet on a future state or environment. This works well if the future is predictable and stable, which we have discovered, it is not. Scenario planning invites us to embrace this uncertainty and imagine several futures. Each will have its own strategy to address it. Each will have a series of leading metrics to tell you in advance if that strategy needs to be employed. It’s a very flexible and for those who do it well – a very practical and reliable method of strategic planning and response.  In fact, the only real way to “fail” at scenario planning is to be too timid. Failure in this is failure of imagination. Because as Hunter says, “if you are imagining a vastly different future, you’ve probably got it wrong.”

The future is wilder and more unpredictable than we think. One analyst gave an example using the film “Minority Report” with Tom Cruise. In the film, Cruise manipulates a 3D computer interface in mid-air. In 2002 that was astonishing. Today, the parts to make that interface, according this same analyst, would cost $70. If we fail to vividly imagine the future – if it doesn’t seem like we are really pushing the envelope, in this age of rapid change, we are likely to underestimate the degree of future change. The failure of scenario planning is the failure of our imagination.

The failure of analysis

Failure of our analytical minds to imagine the real scope and complexity of change is an issue. Frank Buytendijk showed that we “analyze too much and synthesize too little.”

The bottom line is this: analysis focuses on our differences. Synthesis focuses on what makes us the same. We need to stop thinking in terms of “either-or” and differences and to embrace the digital idea of “and” – of synthesis. In a time of change and of great ambiguity this is where the great ideas are born and nurtured.

Summary

Four terms that resonate:

  • Uncertainty.
  • Bimodal thinking.
  • Synthesis.
  • Digital.

Master these.

 

The impact of e-commerce continues to be felt.

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In the Sept. 3 issue of Fortune magazine they asked  “Where have all the shoppers gone?”. A clear cry to find out what is happening. It lists several reasons but one of them is the impact of e-commerce. The graph they included:

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The e-commerce growth is significant but still from a small sales base of 6.4% of the total retail market. The point the article makes is that adaptation to the new world has been difficult. Almost all companies have on-line sales but few master it, resulting in missed growth. An interesting statistic from Green Street Advisors highlights the problem. Customers purchase on-line items of which about 15% are typically stocked in malls.

The solution: Some malls attack on-line threats by adding what the on-line world can not offer, a more personal interaction by adding gyms and wine bars. The mall still offers the convenience but they add new experiences that some shoppers may look for.

Another solution that seems to work is to be able to order on line and pick up at the store. Again, a combination that on-line only can not offer.

Customers continue to look for products and services but stores have to adapt to the way they buy or face extinctions.

 

 

 

On-Demand Services are changing industries.

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Condensed from Steve Schlafman’s blog dates May 4, 2014.

In the pre-mobile era we had to search yellow pages (or google), find a provider, call  or email that provider, wait to connect with someone, schedule a convenient time, hope the provider arrives on time, and then pay with a credit card or cash.  Thankfully, a new array of mobile services removes all of that friction we were used to experiencing. Welcome to the uberification of our service economy: 

The U.S. economy is largely driven by the service sector so it’s only a matter of time until all of our services are accessible via our mobile devices.  The implications are huge for large companies like Google and Craigslist as well as thousands of regional and local service providers.  Hundreds of billions of dollars of enterprise value are up for grabs.  As you can see from the market map, we now have on demand services for: 

 

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Apps are emerging in categories like elderly care, medicine, real estate, and security. Additionally, there are a variety of B2B services emerging such as office cleaning, supply replenishment, tech support, and fleet management. All industries at some stage will feel the impact of on-demand services.

Healthcare’s Innovation Imperative: Ten Truths Small Business Needs To Know

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Key Points:

Inflection points insist on healthcare innovation. Here’s what’s on the horizon:

  • Clinical Models are changing                                      
  • Insured population is growing
  • Marketing target shifting                                               
  • Deductibles and out-of-pocket expenses on the rise
  • New Data Thresholds for studies are emerging         
  • Cost Transparency is coming
  • Decision Making support tools are in demand
  • The smart phone will see you now
  • Data Transparency will be the new normal:
  • Cost, convenience, quality, and consumer preference will have a significant influence on how and where care is delivered.
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Kerry A. Dolan in Forbe
3/20/2014

The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.” Peter Drucker

In a period of massive change, franchises die and are born, previously unimagined models emerge, and incumbents that are too focused on “protecting share” find themselves closing their doors. The healthcare industry represents nearly a fifth of U.S. GDP and it is going through such a period of dramatic change as we speak.  The product companies that dominate the marketplace today find themselves cash rich but growth poor.  At the same time an army of inventors and visionaries in biotechnology, medical devices, diagnostics, health care services, healthcare IT, and consumer health fields are eager to provide a new model for the future.

Healthcare venture funding is extremely tight, entrepreneurship remains a technically sophisticated pursuit, and “evolutions masquerading as innovations” abound. But smart entrepreneurs who harness the dazzling new tools we now have at our disposal have everything to gain if they focus on creating offerings aligned with the emerging value system. Their products and companies will be highly sought after by today’s market leaders… some will overtake existing market leaders entirely.  And patients will benefit tremendously.

Our mandate as health care investors and entrepreneurs must be to channel our time, capital, and expertise exclusively into companies that will thrive in the face of extreme scrutiny, forcing inadequate, expensive legacy systems and interventions into rapid obsolescence.

Inflection points insist on innovation. Here’s what’s on the horizon:

Clinical Models are changing: Fee-for-service, volume-based care models of the past will be replaced by results-driven models. For institutions and individuals providing care to patients this will mean a sharper focus on prevention, minimizing readmissions, better care coordination etc. For companies that market pharmaceuticals and medical devices this will mean being part of a “total care” integrated solution that goes beyond an individual pill or device.

Insured population is growing: The “disappearance” of an uninsured population will increase the number of people who access care. As utilization increases, expenditures will rise, even if prevention becomes more commonplace. As a result, overall costs will receive more scrutiny and payors will exercise more negotiating leverage. In some cases this will result in new price pressure on a specific product. In other cases it will mean less price sensitivity if a new product can show it lowers the total costs of treating a condition.

Marketing target shifting: In the past, physicians were the dominant focus of pharmaceutical and device company marketing efforts. Now, physician sales forces are shrinking, marketing methods are changing, and the targeted audience is shifting. On the one hand, technology has enabled more efficient, lower cost “virtual detailing”; on the other hand it requires a sophisticated understanding of real time, crowd-driven and social tools. With patients-as-consumers and institutional payors demanding more evidence of the value of a service or product, the importance of messaging tailored for these audiences is difficult to overstate.

Deductibles and out-of-pocket expenses on the rise: Insurance reform will result in larger deductibles for more individuals. As consumers pay more out-of-pocket and become more aware of direct costs, they will become more sensitive the ways they access health care. The ability to make a direct value proposition to consumers will be a competitive advantage, if not a competitive necessity for product and service providers.

New Data Thresholds for studies are emerging: Placebo/sham-controlled trial data has been the standard for demonstrating safety and efficacy of new therapeutic interventions. With a new focus on value, there is demand for data that compares new interventions against existing standards of care. Additionally, there is more interest in data that measurably demonstrates enhancements to quality of life, convenience, compliance and adherence improvements, and holistic reductions in disease burden. In the service of this demand, new data sets will complement standard sets including patient reported outcomes data, unstructured data, quantified-self data, and “the Internet of Things” data generated by medical devices, supplies, and even drugs. As these data sets grow, Big Data techniques will transform the raw data into useful information with applications we haven’t even begun to imagine.

Cost Transparency is coming: Health care cost transparency is nonexistent today, both at the level of patients and surprisingly at the level of providers.  Tools are now being built and incentives are being put in place to allow cost transparency along with value tracking and optimization.  In the not-too-distant future, purchasers will view the absence of such data as inconceivable and intolerable.

Decision Making support tools are in demand: Decision-making around a patient’s diagnosis and the optimal course of therapy has been driven by a combination of clinician observations and instinct. Physicians reach conclusions by integrating inputs from the physical examination, family history, and lab/imaging data, all in the physician-specific context of past experience, medical training, and emerging science s/he may have had the chance to review. Increasingly, doctors and patients expect systematic, up-to-date integration of an increasingly exhaustive set of inputs to support decision making. Furthermore integrating case-specific information real time in validated ways into reference data sets will bridge the time and expense gap between the metaphorical “R&D bench and bedside”.

The smart phone will see you now: Health applications and accessories enabled by smart phones, wireless connectivity, and telepresence technologies will expand access, improve efficiency, and increase convenience for patients and providers. They will also allow better data generation, data tracking, data portability, and data organization.

Data Transparency will be the new normal: Institution-specific paper files are becoming a thing of the past as electronic, ubiquitous, patient-accessible records become the new standard. In parallel, patients and clinicians are seeking more clinically-focused annotations in the records in the place of claims-focused coding.

Cost, convenience, quality, and consumer preference will have a significant influence on how and where care is delivered. Within large clinics and hospitals we are already seeing consumer-focused practices like same-day appointments, private waiting rooms, and concierge-like care navigation services. We will also see more care move out of centralized institutions into alternate settings: walk-in clinics in drugstores and airports, self-administered at home lab tests, virtual house calls.While such services and technologies are desirable for their ability to improve patient satisfaction, their ability to drive efficiency, broaden access, reduce costs, and improve outcomes is even more compelling.

A mathematician turned life sciences entrepreneur and venture capitalist, Ashley Ledbetter Dombkowski, Ph.D., has invested in the private and public market healthcare sectors for more than 15 years. She is a Managing Director at venture capital firm Bay City Capital, was on the board and executive team at 23andMe, ahd has co-founded numerous companies including Epizyme and iPierian.

The Internet Of Things Is More Like The Industrial Revolution Than The Digital Revolution

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Key Points:
  • As the Internet subsumes physical objects, the rate of change is accelerating.
  • Stogdill believes these converging phenomena have put us on the cusp of a transformation as dramatic as the Industrial Revolution.“Everyone will be affected by this collision of hardware and software, by the merging of the virtual and real,” he says.
  • “Everyone will be affected by this collision of hardware and software, by the merging of the virtual and real,” he says. “It’s really a watershed moment in technology and culture. We’re at one of those tipping points of history again, where everything shifts to a different reality.
  • Data will literally grow physical appendages, and inform industrial production and public services in extremely powerful and efficient ways.
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Forbes 2/10/2014

How The Internet Of Things Is More Like The Industrial Revolution Than The Digital Revolution

By Glen Martin

Philadelphia’s Centennial Exposition of 1876 was America’s first World’s Fair, and was ostensibly held to mark the nation’s 100th birthday. But it heralded the future as much as it celebrated the past, showcasing the country’s strongest suit: technology.

The centerpiece of the Expo was a gigantic Corliss engine, the apotheosis of 40 years of steam technology. Thirty percent more efficient than standard steam engines of the day, it powered virtually every industrial exhibit at the exposition via a maze of belts, pulleys, and shafts. Visitors were stunned that the gigantic apparatus was supervised by a single attendant, who spent much of his time reading newspapers.

“This exposition was attended by 10 million people at a time when travel was slow and difficult, and it changed the world,” observes Jim Stogdill, general manager of Radar at O’Reilly Media, and general manager of O’Reilly’s upcoming Internet-of-Things-related conference, Solid.

“Think of a farm boy from Kansas looking at that Corliss engine, seeing what it could do, thinking of what was possible,” Stogdill continues. “When he left the exposition, he was a different person. He understood what the technology he saw meant to his own work and life.”

The 1876 exposition didn’t mark the beginning of the Industrial Revolution, says Stogdill. Rather, it signaled its fruition, its point of critical mass. It was the nexus where everything — advanced steam technology, mass production, railroads, telegraphy — merged.

“It foreshadowed the near future, when the Industrial Revolution led to the rapid transformation of society, culturally as well as economically. More than 10,000 patents followed the exposition, and it accelerated the global adoption of the ‘American System of Manufacture.’ The world was never the same after that.”

In terms of the Internet of Things, we have reached that same point of critical mass. In fact, the present moment is more similar to 1876 than to more recent digital disruptions, Stogdill argues. “It’s not just the sheer physicality of this stuff,” he says. “It is also the breadth and speed of the change bearing down on us.”

While the Internet changed everything, says Stogdill, “its changes came in waves, with scientists and alpha geeks affected first, followed by the early adopters who clamored to try it. It wash’t until the Internet was ubiquitous that every Kansas farm boy went online. That 1876 Kansas farm boy may not have foreseen every innovation the Industrial Revolution would bring, but he knew — whether he liked it or not — that his world was changing.”

As the Internet subsumes physical objects, the rate of change is accelerating, observes Stogdill. “Today, stable wireless platforms, standardized software interface components and cheap, widely available sensors have made the connection of virtually every device — from coffee pots to cars — not only possible; they have made it certain.”

“Internet of Things” is now widely used to describe this latest permutation of digital technology; indeed, “overused” may be a more apt description. It teeters on the knife-edge of cliché. “The term is clunky,” Stogdill acknowledges, “but the buzz for the underlying concepts is deserved.”

Stogdill is quick to point out that this “Internet of Everything” goes far beyond the development of new consumer products. Open source hardware and software already are allowing the easy integration of programatic interfaces with everything from weather stations to locomotives. Large, complicated systems — water delivery infrastructure, power plants, sewage treatment plants, office buildings — will be made intelligent by these software and sensor packages, allowing real-time control and exquisitely efficient operation. Manufacturing has been made frictionless, development costs are plunging, and new manufacturing-as-a-service frameworks will create new business models and drive factory production costs down and production up.

“When the digital age began accelerating,” Stogdill explains, “Nicholas Negroponte observed that the world was moving from atoms to bits — that is, the high-value economic sectors were transforming from industrial production to aggregating information.”

“I see the Internet of Everything as the next step,” he says. ”We won’t be moving back to atoms, but we’ll be combining atoms and bits, merging software and hardware. Data will literally grow physical appendages, and inform industrial production and public services in extremely powerful and efficient ways. Power plants will adjust production according to real-time demand, traffic will smooth out as driverless cars become commonplace. We’ll be able to track air and water pollution to an unprecedented degree. Buildings will not only monitor their environmental conditions for maximum comfort and energy efficiency, they’ll be able to adjust energy consumption so it corresponds to electricity availability from sustainable sources.”

Stogdill believes these converging phenomena have put us on the cusp of a transformation as dramatic as the Industrial Revolution.

“Everyone will be affected by this collision of hardware and software, by the merging of the virtual and real,” he says. “It’s really a watershed moment in technology and culture. We’re at one of those tipping points of history again, where everything shifts to a different reality. That’s what the 1876 exposition was all about. It’s one thing to read about the exposition’s Corliss engine, but it would’ve been a wholly different experience to stand in that exhibit hall and see, feel, and hear its 1,400 horsepower at work, driving thousands of machines. It is that sensory experience that we intend to capture with Solid. When people look back in 150 years, we think they could well say, ‘This is when they got it. This is when they understood.’”

This post originally appeared on O’Reilly Radar. (“More 1876 than 1995”).

On-line reviews are causing the Twilight of the Brands

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Key Points:

  • Brands have never been more fragile. What has really weakened the power of brands is the Internet, which has given ordinary consumers easy access to expert reviews, user reviews, and detailed product data, in an array of categories.
  • A recent PricewaterhouseCoopers study found that eighty per cent of consumers look at online reviews before making major purchases.
  • Upstarts now find it easier to compete with the big boys.
  • The positive, if you build a better mousetrap, people will soon know about it.

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The New Yorker by February 17, 2014

Twelve months ago, Lululemon Athletica was one of the hottest brands in the world. Sales of its high-priced yoga gear were exploding; the company was expanding into new markets; experts were in awe of its “cultlike following.” As one observer put it, “They’re more than apparel. They’re a life style.” But then customers started complaining about pilling fabrics, bleeding dyes, and, most memorably, yoga pants so thin that they effectively became transparent when you bent over. Lululemon’s founder made things worse by suggesting that some women were too fat to wear the company’s clothes. And that was the end of Lululemon’s charmed existence: the founder stepped down from his management role, and, a few weeks ago, the company said that it had seen sales “decelerate meaningfully.”

It’s a truism of business-book thinking that a company’s brand is its “most important asset,” more valuable than technology or patents or manufacturing prowess. But brands have never been more fragile. The reason is simple: consumers are supremely well informed and far more likely to investigate the real value of products than to rely on logos. “Absolute Value,” a new book by Itamar Simonson, a marketing professor at Stanford, and Emanuel Rosen, a former software executive, shows that, historically, the rise of brands was a response to an information-poor environment. When consumers had to rely on advertisements and their past experience with a company, brands served as proxies for quality; if a car was made by G.M., or a ketchup by Heinz, you assumed that it was pretty good. It was hard to figure out if a new product from an unfamiliar company was reliable or not, so brand loyalty was a way of reducing risk. As recently as the nineteen-eighties, nearly four-fifths of American car buyers stayed loyal to a brand.

Today, consumers can read reams of research about whatever they want to buy. This started back with Consumer Reports, which did objective studies of products, and with J. D. Power’s quality rankings, which revealed what ordinary customers thought of the cars they’d bought. But what’s really weakened the power of brands is the Internet, which has given ordinary consumers easy access to expert reviews, user reviews, and detailed product data, in an array of categories. A recent PricewaterhouseCoopers study found that eighty per cent of consumers look at online reviews before making major purchases, and a host of studies have logged the strong influence those reviews have on the decisions people make. The rise of social media has accelerated the trend to an astonishing degree: a dud product can become a laughingstock in a matter of hours. In the old days, you might buy a Sony television set because you’d owned one before, or because you trusted the brand. Today, such considerations matter much less than reviews on Amazon and Engadget and CNET. As Simonson told me, “each product now has to prove itself on its own.”

It’s been argued that the welter of information will actually make brands more valuable. As the influential consultancy Interbrand puts it, “In a world where consumers are oftentimes overwhelmed with information, the role a brand plays in people’s lives has become all the more important.” But information overload is largely a myth. “Most consumers learn very quickly how to get a great deal of information efficiently and effectively,” Simonson says. “Most of us figure out how to find what we’re looking for without spending huge amounts of time online.” And this has made customer loyalty pretty much a thing of the past. Only twenty-five per cent of American respondents in a recent Ernst & Young study said that brand loyalty affected how they shopped.

For established brands, this is a nightmare. You can never coast on past performance—the percentage of brand-loyal car buyers has plummeted in the past twenty years—and the price premium that a recognized brand can charge has shrunk. If you’re making a better product, you can still charge more, but, if your product is much like that of your competitors, your price needs to be similar, too. That’s the clearest indication that the economic value of brands—traditionally assessed by the premium a company could charge—is waning. This isn’t true across the board: brands retain value where the brand association is integral to the experience of a product (Coca-Cola, say), or where they confer status, as with luxury goods. But even here the information deluge is transformative; luxury travel, for instance, has been profoundly affected by sites like TripAdvisor.

For consumers this is ideal: they’re making better choices, and heightened competition has raised quality and held down prices. And they’re not the only beneficiaries; upstarts now find it easier to compete with the big boys. If you build a better mousetrap, people will soon know about it. A decade ago, personal-computer companies like Asus and Acer had almost no brand identity outside Taiwan. Now they are major players. Roku, a maker of streaming entertainment devices, has thrived even though its products have to compete with similar ones made by Apple (which is usually cited as the world’s most valuable brand). And Hyundai has gone from being a joke to selling four million cars a year. For much of the twentieth century, consumer markets were stable. Today, they are tumultuous, and you’re only as good as your last product. For brands like Lululemon, there’s only one consolation: make something really great and your past sins will be forgotten. 

ILLUSTRATION: Christoph Niemann

Doctor On Demand Launches To Bring A $40 (Virtual) House Call To Healthcare

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Adam Jackson and former Stanford physician and White House fellow Dr. Pat Basu want to help modernize healthcare by bringing the house call back — mobile-style. To do that, today, they’re officially launching Doctor On Demand, a service that aims to connect consumers to a licensed U.S. physician via app an on iPhone, Android or tablet — from anywhere.

Well, in saying “anywhere,” that’s the eventual goal. For now, at launch, the service is available in 15 U.S. states for a price of $40 per video call — a price the co-founders believe puts Doctor on Demand on par with most insurance co-pays and cheaper than most urgent care. The idea is to make a quality, experienced physician available to any consumer for just $40.

Because this model is not without its antecedents, Doctor on Demand is looking to remove as much friction as possible from the process, allowing patients to connect with a doctor in real and pay with their Health Care Spending Account, Flexible Spending Account or any major credit card. The other, ancillary benefit (so to speak) of this is the ability to reduce wait times at doctor’s offices and practices across the country, and allow patients to receive quality medical care from the comfort of their couch.

To do that, Doctor on Demand uses a HIPAA-secure network and synchronous video chat to allow patients to communicate with doctors. However, there is a caveat: Doctor on Demand is to be used for “non-emergent clinical issues that do not immediately require a direct presence, lab work or imaging.”
While this limits the network’s utility to some degree, it still covers a significant portion of medical issues. For instance, you could talk to a doctor about symptoms of common colds, fevers, coughs, sinus infections, allergies, upset stomachs, fevers, rashes, eye problems and so on. You can even get your prescription refilled, and upload high-res images during the call so that, say, a busy parent can give the doctor a sense of how their child’s symptoms appeared at their worst.

Jackson and Basu tell us that, through partnerships with health systems, their network of physicians has grown to 1,000 nationally and are overseen by Basu himself — the co-founder and CMO (Chief Medical Officer). They are also in the process of putting together a multidisciplinary team of doctors, so that, eventually, when one signs on to Doctors on Demand, they will be able to be routed immediately to a specialist (say an Ear, Nose and Throat doctor) based on the keywords they input from the start.

But today, the team includes the support of people like former U.S. Senate Majority Leader Tom Daschle, who serves on the company’s board of directors and co-founder Jay McGraw, an Emmy Award-winning executive producer of The Doctors. To support its launch in 15 states today (which, by the way, include California, Florida, Georgia, Illinois, Indiana, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Texas, Virginia and Washington), Doctor on Demand has raised $3 million in seed funding from Venrock, Andreessen Horowitz, Google Ventures, Lerer Ventures, Shasta Ventures and Athena Health CEO Jonathan Bush.