|By William Schmarzo||
|February 19, 2017 12:00 PM EST||
Business Model Transformation and What it Means to the Data Industry
I recently read an MIT Sloan Management Review article by Clayton Christensen’s recent book titled “The Hard Truth About Business Model Innovations.” While the article is full of great observations about business model transformation, the most important motivation for business model transformation is found at the end:
“..our understanding of the business model journey allows us to see that, over the long term, the greatest innovation risk a company can take is to decide not to create new businesses that decouple the company’s future from that of its current business units.”
We use the Big Data Business Model Maturity Index as a vehicle for engaging with our clients about how they can leverage data and analytics to transform their business models (see Figure 1).
Figure 1: Big Data Business Model Maturity Index
In light of the Big Data Business Model Maturity Index, the article really got me thinking about how the entire data technology industry is posed for a business model transformation. Let me explain.
Across a number of industries, we are seeing business models under attack. It may have started with the digital media industries (advertising, entertainment) but it has quickly spread into physical product and service industries such as retail, telecommunications, financial services, healthcare, education, travel, hospitality, transportation, distribution and manufacturing. Organizations within these industries are leveraging data and analytics to disrupt existing business models (and disintermediate customer relationships) as the boundaries that separate industries evaporate (see Figure 2).
Figure 2: Big Data Driving Business Model Disruption
I believe that same business model disruption (and subsequent customer disintermediation) is going to happen to the technology industry that spawned all of this transformation, and no technology industry has the opportunity to be a business model disrupter more than the data technology industry – the industry that gathers, stores, secures, provisions and analyzes the growing wealth of transactional, social, mobile, wearables, embedded, machine generated and publicly available data.
So I searched for a proxy that might provide some insights into the business model transformation of the data industry, which took me to the bottled water industry transformation.
Bottled Water Business Model Transformation
For over three decades, water was simply something that came out of the tap in your home or the water fountain. While water was essential to life, its relative financial value was very modest. Then things changed.
In 1977, Perrier launched a successful advertising campaign in the United States, launching the popularity for bottled water. Bottled water is currently the second largest beverage category by volume in the United States, behind carbonated soft drinks (CSDs). The Beverage Marketing Corporation (BMC) predicts that bottled water will surpass CSDs to become the number one beverage in America by early 2017 (see Figure 3).
Figure 3: Increasing Demand for Bottled Water (per Person consumption)
Despite having one of the best municipal tap water systems in the world, American consumers flocked to commercial bottled water for four key reasons:
- First, consumers have been bombarded with advertisements that claim that their tap water is unsafe, or that bottled water is safer, healthier, and more hip.
- Second, public drinking water fountains have become increasingly hard to find. And the ones that exist are not being adequately maintained.
- Third, people are increasingly fearful of our tap water, hearing stories about contamination, new chemicals that our treatment systems aren’t designed to remove, or occasional failures of infrastructure that isn’t being adequately maintained (see Flint, MI water disaster).
- Fourth, some people don’t like the taste of their tap water, or think they don’t.
A couple of key lessons that we can take away from the bottled water business model transformation:
- Through a business model transformation effort focused on value and not just functionality, consumers willingly pay 2000x more for bottled water than they do for basically the same functionality coming out of the tap or water fountain.
- The vendor didn’t create a new product – it changed the economic value of their product (water), through effective marketing, which spawned an industry.
Future of the Data Industry
The same phenomenon is starting to occur in the data technology industry, and the potential to change the financial valuation of data technology players could be stunning! The challenge is how do these data technology vendors turn what has historically been a commodity by-product (data) into a premium product (business outcomes)?
Organizations have traditionally treated data as a legal or compliance requirement, supporting limited management reporting requirements. Consequently organizations have treated data as a cost to be minimized. The financial valuation of data technology companies has been based upon those perceptions and relationships. The below chart from Gartner summarizes the business model transformation challenge (see Figure 4):
Data technology companies tend to sell to the part of the organization where data is a cost to be minimized and the sales processes focuses on negotiating with Procurement on price, margin, terms and conditions, instead of engaging with the part of the organization where data is a corporate asset to be exploited for business value, and discussions focus on time-to-value and de-risking projects.
It would seem that anything that the data technology companies could do to increase the perceived and actual value of data to its customers and the market could dramatically increase their financial valuation. This includes leveraging data to deliver business outcomes such as:
- Optimize key business processes,
- Uncover new monetization or revenue opportunities,
- Reduce security, regulatory and compliance risks,
- Create a more compelling customer and partner engagement, and
- Enable new business models
This would require a business transformation for technology companies in order to focus more on delivering business outcomes and less on selling technology piece parts with “some assembly required.”
Data Industry Call to Action
In much the same way that Perrier’s introduction of bottled water to the United States in 1977 led to the creation of a new industry, the data technology industry sits at a similar business transformation point. But business model innovation and transformation will not be achieved with a “business as usual” approach. As Clayton Christensen points out: “organizational interdependences developed to optimize existing business processes dooms the creation of a new business model within the existing business model.” It will require these companies to think differently about how they structure their organization, how they go to market, how they build products and how they incent their customer engagement teams in order to create value for their customers.
There is much that we can learn from other organizations that have transformational business models. Companies such as Netflix, Amazon, Uber and GE have created business models by focusing on the Customer Journey; by meeting customers “where they are and taking them where they need to be” and focusing on delivering business outcomes (or decisions in data science vernacular), not just technology piece parts.
But this needs to be done at scale; something a data technology company is uniquely qualified for, with the ability to create pre-engineered solutions and “collaborative value creation” platforms that couple hardware, software, and consulting to support the customer journey.
Data technology companies can be the pioneers in transforming their business models; however, they will not drive business model transformation by selling data as a commodity like tap water. Instead, data technology companies can exploit product development, sales, marketing and consulting to focus on delivering customer business outcomes at scale; helping customers to leverage and monetize their data assets to optimize key business processes, reduce security and compliance risks, uncover new monetization opportunities and drive a more compelling customer engagement.
 Here is some background reading for more details on this topic:
- Determining the Economic Value of Data
- Chief Data Officer Toolkit: Leading the Digital Business Transformation – Part I
- Chief Data Officer Toolkit: Leading the Digital Business Transformation – Part II
- Steve Todd’s Data Value Research with Dr. Jim Short of the University of California San Diego: http://stevetodd.typepad.com
Plus, I am currently working on a research paper with the University of San Francisco titled “Applying Economic Concepts To Big Data To Determine The Financial Value Of The Organization’s Data And Analytics, And Understanding The Ramifications On The Organizations’ Financial Statements And IT Operations And Business Strategies” where we will put forth a framework and supporting processes to help organizations to determine (estimate) the economic value from their data.
The post Business Model Transformation and What it Means to the Data Industry appeared first on InFocus Blog | Dell EMC Services.
SYS-CON Events announced today that Juniper Networks (NYSE: JNPR), an industry leader in automated, scalable and secure networks, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Juniper Networks challenges the status quo with products, solutions and services that transform the economics of networking. The company co-innovates with customers and partners to deliver automated, scalable and secure network...
Mar. 27, 2017 03:45 PM EDT Reads: 1,360
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.
Mar. 27, 2017 02:45 PM EDT Reads: 1,936
SYS-CON Events announced today that Linux Academy, the foremost online Linux and cloud training platform and community, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Linux Academy was founded on the belief that providing high-quality, in-depth training should be available at an affordable price. Industry leaders in quality training, provided services, and student certification passes, its goal is to c...
Mar. 27, 2017 02:30 PM EDT Reads: 4,008
Deep learning has been very successful in social sciences and specially areas where there is a lot of data. Trading is another field that can be viewed as social science with a lot of data. With the advent of Deep Learning and Big Data technologies for efficient computation, we are finally able to use the same methods in investment management as we would in face recognition or in making chat-bots. In his session at 20th Cloud Expo, Gaurav Chakravorty, co-founder and Head of Strategy Development ...
Mar. 27, 2017 02:30 PM EDT Reads: 3,659
SYS-CON Events announced today that CA Technologies has been named “Platinum Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY, and the 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. CA Technologies helps customers succeed in a future where every business – from apparel to energy – is being rewritten by software. From ...
Mar. 27, 2017 02:00 PM EDT Reads: 2,037
In his session at @ThingsExpo, Eric Lachapelle, CEO of the Professional Evaluation and Certification Board (PECB), will provide an overview of various initiatives to certifiy the security of connected devices and future trends in ensuring public trust of IoT. Eric Lachapelle is the Chief Executive Officer of the Professional Evaluation and Certification Board (PECB), an international certification body. His role is to help companies and individuals to achieve professional, accredited and worldw...
Mar. 27, 2017 01:15 PM EDT Reads: 722
SYS-CON Events announced today that Loom Systems will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Founded in 2015, Loom Systems delivers an advanced AI solution to predict and prevent problems in the digital business. Loom stands alone in the industry as an AI analysis platform requiring no prior math knowledge from operators, leveraging the existing staff to succeed in the digital era. With offices in S...
Mar. 27, 2017 01:00 PM EDT Reads: 1,451
SYS-CON Events announced today that Interoute, owner-operator of one of Europe's largest networks and a global cloud services platform, has been named “Bronze Sponsor” of SYS-CON's 20th Cloud Expo, which will take place on June 6-8, 2017 at the Javits Center in New York, New York. Interoute is the owner-operator of one of Europe's largest networks and a global cloud services platform which encompasses 12 data centers, 14 virtual data centers and 31 colocation centers, with connections to 195 add...
Mar. 27, 2017 12:45 PM EDT Reads: 1,361
SYS-CON Events announced today that T-Mobile will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. As America's Un-carrier, T-Mobile US, Inc., is redefining the way consumers and businesses buy wireless services through leading product and service innovation. The Company's advanced nationwide 4G LTE network delivers outstanding wireless experiences to 67.4 million customers who are unwilling to compromise on ...
Mar. 27, 2017 11:15 AM EDT Reads: 2,368
SYS-CON Events announced today that HTBase will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. HTBase (Gartner 2016 Cool Vendor) delivers a Composable IT infrastructure solution architected for agility and increased efficiency. It turns compute, storage, and fabric into fluid pools of resources that are easily composed and re-composed to meet each application’s needs. With HTBase, companies can quickly prov...
Mar. 27, 2017 10:30 AM EDT Reads: 3,009
SYS-CON Events announced today that Infranics will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Since 2000, Infranics has developed SysMaster Suite, which is required for the stable and efficient management of ICT infrastructure. The ICT management solution developed and provided by Infranics continues to add intelligence to the ICT infrastructure through the IMC (Infra Management Cycle) based on mathemat...
Mar. 27, 2017 10:30 AM EDT Reads: 3,143
SYS-CON Events announced today that Cloudistics, an on-premises cloud computing company, has been named “Bronze Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Cloudistics delivers a complete public cloud experience with composable on-premises infrastructures to medium and large enterprises. Its software-defined technology natively converges network, storage, compute, virtualization, and management into a ...
Mar. 27, 2017 09:30 AM EDT Reads: 2,111
There are 66 million network cameras capturing terabytes of data. How did factories in Japan improve physical security at the facilities and improve employee productivity? Edge Computing reduces possible kilobytes of data collected per second to only a few kilobytes of data transmitted to the public cloud every day. Data is aggregated and analyzed close to sensors so only intelligent results need to be transmitted to the cloud. Non-essential data is recycled to optimize storage.
Mar. 27, 2017 08:15 AM EDT Reads: 3,107
"I think that everyone recognizes that for IoT to really realize its full potential and value that it is about creating ecosystems and marketplaces and that no single vendor is able to support what is required," explained Esmeralda Swartz, VP, Marketing Enterprise and Cloud at Ericsson, in this SYS-CON.tv interview at @ThingsExpo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Mar. 27, 2017 08:00 AM EDT Reads: 4,333
The essence of cloud computing is that all consumable IT resources are delivered as services. In his session at 15th Cloud Expo, Yung Chou, Technology Evangelist at Microsoft, demonstrated the concepts and implementations of two important cloud computing deliveries: Infrastructure as a Service (IaaS) and Platform as a Service (PaaS). He discussed from business and technical viewpoints what exactly they are, why we care, how they are different and in what ways, and the strategies for IT to transi...
Mar. 27, 2017 05:00 AM EDT Reads: 6,282
SYS-CON Events announced today that Outlyer, a monitoring service for DevOps and operations teams, has been named “Bronze Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Outlyer is a monitoring service for DevOps and Operations teams running Cloud, SaaS, Microservices and IoT deployments. Designed for today's dynamic environments that need beyond cloud-scale monitoring, we make monitoring effortless so you ...
Mar. 27, 2017 02:15 AM EDT Reads: 4,296
My team embarked on building a data lake for our sales and marketing data to better understand customer journeys. This required building a hybrid data pipeline to connect our cloud CRM with the new Hadoop Data Lake. One challenge is that IT was not in a position to provide support until we proved value and marketing did not have the experience, so we embarked on the journey ourselves within the product marketing team for our line of business within Progress. In his session at @BigDataExpo, Sum...
Mar. 27, 2017 01:45 AM EDT Reads: 3,042
Keeping pace with advancements in software delivery processes and tooling is taxing even for the most proficient organizations. Point tools, platforms, open source and the increasing adoption of private and public cloud services requires strong engineering rigor - all in the face of developer demands to use the tools of choice. As Agile has settled in as a mainstream practice, now DevOps has emerged as the next wave to improve software delivery speed and output. To make DevOps work, organization...
Mar. 27, 2017 01:15 AM EDT Reads: 1,974
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm.
Mar. 27, 2017 12:45 AM EDT Reads: 2,265
Apache Hadoop is emerging as a distributed platform for handling large and fast incoming streams of data. Predictive maintenance, supply chain optimization, and Internet-of-Things analysis are examples where Hadoop provides the scalable storage, processing, and analytics platform to gain meaningful insights from granular data that is typically only valuable from a large-scale, aggregate view. One architecture useful for capturing and analyzing streaming data is the Lambda Architecture, represent...
Mar. 26, 2017 08:30 PM EDT Reads: 6,263