Welcome!

@BigDataExpo Authors: William Schmarzo, Christopher Harrold, Yeshim Deniz, Dana Gardner, Elizabeth White

Related Topics: @BigDataExpo, @CloudExpo, @ThingsExpo

@BigDataExpo: Blog Feed Post

Business Model Transformation | @CloudExpo #BigData #DigitalTransformation

Across a number of industries, we are seeing business models under attack

Business Model Transformation and What it Means to the Data Industry

I recently read an MIT Sloan Management Review article by Clayton Christensen’s recent book titled “The Hard Truth About Business Model Innovations.” While the article is full of great observations about business model transformation, the most important motivation for business model transformation is found at the end:

“..our understanding of the business model journey allows us to see that, over the long term, the greatest innovation risk a company can take is to decide not to create new businesses that decouple the company’s future from that of its current business units.”

We use the Big Data Business Model Maturity Index as a vehicle for engaging with our clients about how they can leverage data and analytics to transform their business models (see Figure 1).

Figure 1: Big Data Business Model Maturity Index

In light of the Big Data Business Model Maturity Index, the article really got me thinking about how the entire data technology industry is posed for a business model transformation.  Let me explain.

Across a number of industries, we are seeing business models under attack.  It may have started with the digital media industries (advertising, entertainment) but it has quickly spread into physical product and service industries such as retail, telecommunications, financial services, healthcare, education, travel, hospitality, transportation, distribution and manufacturing.  Organizations within these industries are leveraging data and analytics to disrupt existing business models (and disintermediate customer relationships) as the boundaries that separate industries evaporate (see Figure 2).

Figure 2: Big Data Driving Business Model Disruption

I believe that same business model disruption (and subsequent customer disintermediation) is going to happen to the technology industry that spawned all of this transformation, and no technology industry has the opportunity to be a business model disrupter more than the data technology industry – the industry that gathers, stores, secures, provisions and analyzes the growing wealth of transactional, social, mobile, wearables, embedded, machine generated and publicly available data.

So I searched for a proxy that might provide some insights into the business model transformation of the data industry, which took me to the bottled water industry transformation.

Bottled Water Business Model Transformation
For over three decades, water was simply something that came out of the tap in your home or the water fountain.  While water was essential to life, its relative financial value was very modest. Then things changed.

In 1977, Perrier launched a successful advertising campaign in the United States, launching the popularity for bottled water. Bottled water is currently the second largest beverage category by volume in the United States, behind carbonated soft drinks (CSDs). The Beverage Marketing Corporation (BMC) predicts that bottled water will surpass CSDs to become the number one beverage in America by early 2017[1] (see Figure 3).

Figure 3: Increasing Demand for Bottled Water (per Person consumption)

Despite having one of the best municipal tap water systems in the world, American consumers flocked to commercial bottled water for four key reasons[2]:

  • First, consumers have been bombarded with advertisements that claim that their tap water is unsafe, or that bottled water is safer, healthier, and more hip.
  • Second, public drinking water fountains have become increasingly hard to find. And the ones that exist are not being adequately maintained.
  • Third, people are increasingly fearful of our tap water, hearing stories about contamination, new chemicals that our treatment systems aren’t designed to remove, or occasional failures of infrastructure that isn’t being adequately maintained (see Flint, MI water disaster).
  • Fourth, some people don’t like the taste of their tap water, or think they don’t.

A couple of key lessons that we can take away from the bottled water business model transformation:

  • Through a business model transformation effort focused on value and not just functionality, consumers willingly pay 2000x more for bottled water than they do for basically the same functionality coming out of the tap or water fountain.
  • The vendor didn’t create a new product – it changed the economic value of their product (water), through effective marketing, which spawned an industry.

Future of the Data Industry
The same phenomenon is starting to occur in the data technology industry, and the potential to change the financial valuation of data technology players could be stunning!  The challenge is how do these data technology vendors turn what has historically been a commodity by-product (data) into a premium product (business outcomes)?

Organizations have traditionally treated data as a legal or compliance requirement, supporting limited management reporting requirements.  Consequently organizations have treated data as a cost to be minimized.  The financial valuation of data technology companies has been based upon those perceptions and relationships. The below chart from Gartner summarizes the business model transformation challenge (see Figure 4):

Figure 4

Data technology companies tend to sell to the part of the organization where data is a cost to be minimized and the sales processes focuses on negotiating with Procurement on price, margin, terms and conditions, instead of engaging with the part of the organization where data is a corporate asset to be exploited for business value, and discussions focus on time-to-value and de-risking projects.

It would seem that anything that the data technology companies could do to increase the perceived and actual value of data to its customers and the market could dramatically increase their financial valuation.  This includes leveraging data to deliver business outcomes such as:

  • Optimize key business processes,
  • Uncover new monetization or revenue opportunities,
  • Reduce security, regulatory and compliance risks,
  • Create a more compelling customer and partner engagement, and
  • Enable new business models

This would require a business transformation for technology companies in order to focus more on delivering business outcomes and less on selling technology piece parts with “some assembly required.”

Data Industry Call to Action
In much the same way that Perrier’s introduction of bottled water to the United States in 1977 led to the creation of a new industry, the data technology industry sits at a similar business transformation point.  But business model innovation and transformation will not be achieved with a “business as usual” approach.  As Clayton Christensen points out: “organizational interdependences developed to optimize existing business processes dooms the creation of a new business model within the existing business model.”  It will require these companies to think differently about how they structure their organization, how they go to market, how they build products and how they incent their customer engagement teams in order to create value for their customers.

There is much that we can learn from other organizations that have transformational business models.  Companies such as Netflix, Amazon, Uber and GE have created business models by focusing on the Customer Journey; by meeting customers “where they are and taking them where they need to be” and focusing on delivering business outcomes (or decisions in data science vernacular), not just technology piece parts.

But this needs to be done at scale; something a data technology company is uniquely qualified for, with the ability to create pre-engineered solutions and “collaborative value creation” platforms that couple hardware, software, and consulting to support the customer journey.

Data technology companies can be the pioneers in transforming their business models; however, they will not drive business model transformation by selling data as a commodity like tap water.  Instead, data technology companies can exploit product development, sales, marketing and consulting to focus on delivering customer business outcomes at scale; helping customers to leverage and monetize their data assets to optimize key business processes, reduce security and compliance risks, uncover new monetization opportunities and drive a more compelling customer engagement[3].

[1] https://en.wikipedia.org/wiki/Bottled_water

[2] http://scienceblogs.com/significantfigures/index.php/2013/04/25/bottled-water-sales-the-shocking-reality/

[3] Here is some background reading for more details on this topic:

Plus, I am currently working on a research paper with the University of San Francisco titled “Applying Economic Concepts To Big Data To Determine The Financial Value Of The Organization’s Data And Analytics, And Understanding The Ramifications On The Organizations’ Financial Statements And IT Operations And Business Strategies” where we will put forth a framework and supporting processes to help organizations to determine (estimate) the economic value from their data.

The post Business Model Transformation and What it Means to the Data Industry appeared first on InFocus Blog | Dell EMC Services.

More Stories By William Schmarzo

Bill Schmarzo, author of “Big Data: Understanding How Data Powers Big Business”, is responsible for setting the strategy and defining the Big Data service line offerings and capabilities for the EMC Global Services organization. As part of Bill’s CTO charter, he is responsible for working with organizations to help them identify where and how to start their big data journeys. He’s written several white papers, avid blogger and is a frequent speaker on the use of Big Data and advanced analytics to power organization’s key business initiatives. He also teaches the “Big Data MBA” at the University of San Francisco School of Management.

Bill has nearly three decades of experience in data warehousing, BI and analytics. Bill authored EMC’s Vision Workshop methodology that links an organization’s strategic business initiatives with their supporting data and analytic requirements, and co-authored with Ralph Kimball a series of articles on analytic applications. Bill has served on The Data Warehouse Institute’s faculty as the head of the analytic applications curriculum.

Previously, Bill was the Vice President of Advertiser Analytics at Yahoo and the Vice President of Analytic Applications at Business Objects.

@BigDataExpo Stories
SYS-CON Events announced today that Hitrons Solutions will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Hitrons Solutions Inc. is distributor in the North American market for unique products and services of small and medium-size businesses, including cloud services and solutions, SEO marketing platforms, and mobile applications.
In an era of historic innovation fueled by unprecedented access to data and technology, the low cost and risk of entering new markets has leveled the playing field for business. Today, any ambitious innovator can easily introduce a new application or product that can reinvent business models and transform the client experience. In their Day 2 Keynote at 19th Cloud Expo, Mercer Rowe, IBM Vice President of Strategic Alliances, and Raejeanne Skillern, Intel Vice President of Data Center Group and G...
Financial Technology has become a topic of intense interest throughout the cloud developer and enterprise IT communities. Accordingly, attendees at the upcoming 20th Cloud Expo at the Javits Center in New York, June 6-8, 2017, will find fresh new content in a new track called FinTech.
@GonzalezCarmen has been ranked the Number One Influencer and @ThingsExpo has been named the Number One Brand in the “M2M 2016: Top 100 Influencers and Brands” by Onalytica. Onalytica analyzed tweets over the last 6 months mentioning the keywords M2M OR “Machine to Machine.” They then identified the top 100 most influential brands and individuals leading the discussion on Twitter.
20th Cloud Expo, taking place June 6-8, 2017, at the Javits Center in New York City, NY, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy.
Manufacturers are embracing the Industrial Internet the same way consumers are leveraging Fitbits – to improve overall health and wellness. Both can provide consistent measurement, visibility, and suggest performance improvements customized to help reach goals. Fitbit users can view real-time data and make adjustments to increase their activity. In his session at @ThingsExpo, Mark Bernardo Professional Services Leader, Americas, at GE Digital, discussed how leveraging the Industrial Internet and...
SYS-CON Events announced today that delaPlex will exhibit at SYS-CON's @CloudExpo, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. delaPlex pioneered Software Development as a Service (SDaaS), which provides scalable resources to build, test, and deploy software. It’s a fast and more reliable way to develop a new product or expand your in-house team.
Information technology (IT) advances are transforming the way we innovate in business, thereby disrupting the old guard and their predictable status-quo. It’s creating global market turbulence. Industries are converging, and new opportunities and threats are emerging, like never before. So, how are savvy chief information officers (CIOs) leading this transition? Back in 2015, the IBM Institute for Business Value conducted a market study that included the findings from over 1,800 CIO interviews ...
"We host and fully manage cloud data services, whether we store, the data, move the data, or run analytics on the data," stated Kamal Shannak, Senior Development Manager, Cloud Data Services, IBM, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Extreme Computing is the ability to leverage highly performant infrastructure and software to accelerate Big Data, machine learning, HPC, and Enterprise applications. High IOPS Storage, low-latency networks, in-memory databases, GPUs and other parallel accelerators are being used to achieve faster results and help businesses make better decisions. In his session at 18th Cloud Expo, Michael O'Neill, Strategic Business Development at NVIDIA, focused on some of the unique ways extreme computing is...
The explosion of new web/cloud/IoT-based applications and the data they generate are transforming our world right before our eyes. In this rush to adopt these new technologies, organizations are often ignoring fundamental questions concerning who owns the data and failing to ask for permission to conduct invasive surveillance of their customers. Organizations that are not transparent about how their systems gather data telemetry without offering shared data ownership risk product rejection, regu...
Due of the rise of Hadoop, many enterprises are now deploying their first small clusters of 10 to 20 servers. At this small scale, the complexity of operating the cluster looks and feels like general data center servers. It is not until the clusters scale, as they inevitably do, when the pain caused by the exponential complexity becomes apparent. We've seen this problem occur time and time again. In his session at Big Data Expo, Greg Bruno, Vice President of Engineering and co-founder of StackIQ...
The security needs of IoT environments require a strong, proven approach to maintain security, trust and privacy in their ecosystem. Assurance and protection of device identity, secure data encryption and authentication are the key security challenges organizations are trying to address when integrating IoT devices. This holds true for IoT applications in a wide range of industries, for example, healthcare, consumer devices, and manufacturing. In his session at @ThingsExpo, Lancen LaChance, vic...
FinTech is the sum of financial and technology, and it’s one of the fastest growing tech industries. Total global investments in FinTech almost reached $50 billion last year, but there is still a great deal of confusion over what it is and what it means – especially as it applies to retirement. Building financial startups is not simple, but with the right team, technology and an innovative approach it can be an extremely interesting domain to disrupt. FinTech heralds a financial revolution that...
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place June 6-8, 2017, at the Javits Center in New York City, New York, is co-located with 20th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry p...
In his session at DevOps Summit, Tapabrata Pal, Director of Enterprise Architecture at Capital One, will tell a story about how Capital One has embraced Agile and DevOps Security practices across the Enterprise – driven by Enterprise Architecture; bringing in Development, Operations and Information Security organizations together. Capital Ones DevOpsSec practice is based upon three "pillars" – Shift-Left, Automate Everything, Dashboard Everything. Within about three years, from 100% waterfall, C...
Addteq is one of the top 10 Platinum Atlassian Experts who specialize in DevOps, custom and continuous integration, automation, plugin development, and consulting for midsize and global firms. Addteq firmly believes that automation is essential for successful software releases. Addteq centers its products and services around this fundamentally unique approach to delivering complete software release management solutions. With a combination of Addteq's services and our extensive list of partners,...
In his keynote at @ThingsExpo, Chris Matthieu, Director of IoT Engineering at Citrix and co-founder and CTO of Octoblu, focused on building an IoT platform and company. He provided a behind-the-scenes look at Octoblu’s platform, business, and pivots along the way (including the Citrix acquisition of Octoblu).
SYS-CON Events announced today that IoT Now has been named “Media Sponsor” of SYS-CON's 20th International Cloud Expo, which will take place on June 6–8, 2017, at the Javits Center in New York City, NY. IoT Now explores the evolving opportunities and challenges facing CSPs, and it passes on some lessons learned from those who have taken the first steps in next-gen IoT services.
You think you know what’s in your data. But do you? Most organizations are now aware of the business intelligence represented by their data. Data science stands to take this to a level you never thought of – literally. The techniques of data science, when used with the capabilities of Big Data technologies, can make connections you had not yet imagined, helping you discover new insights and ask new questions of your data. In his session at @ThingsExpo, Sarbjit Sarkaria, data science team lead ...