Posts Tagged ‘Business Model’

Is Apple Cooling or Transitioning to a Techno-Luxury House of Brands?

Sunday, June 8th, 2014

Blog graphicThe recent announcement that Apple is acquiring Beats Electronics for its streaming audio and electronics capabilities has caused consternation on Wall Street in terms of whether this is an indication that Apple’s renowned ability to innovate in-house is cooling and that the company is beginning to stall.

Most of the attention around the Beats acquisition has focused on its streaming capability and whether it offers as good a service as Spotify or Pandora. The potential that this joint team brings for developing future offerings in the broader entertainment landscape, including video, should not be ignored.

Other key benefits for Apple include Beats’ wealth of aggregate knowledge of the entertainment, music and electronics industries, as well as its connection with the youth culture – something that many other companies seek to emulate. Beats is considered to be a relatively strong U.S. brand with a youth flavor and one that, when attached to Apple and its global market presence and subscriber base, could infuse a stronger linkage with their younger purchasers, further extending their cool image and status.

At the heart of this transaction, however, is the issue of “the innovation divide”, where larger process driven companies are not always as flexible and in tune with the rapidly changing technologies and consumer demands that startups seem to easily tap into. This is why we have seen Facebook acquiring WhatsApp and Oculus. as well as Google acquiring Nest.

The real challenge faced when executing such acquisitions is being able to blend the cultures and mindsets of the new company with the dominant corporate culture that prevails. This may seem easy but the reality is that the founders and creative thought leaders who drive the acquired company usually leave fairly quickly. What can Apple do to prevent this happening and also create a mechanism and process for future acquisition and expansion going forward? The key may be keeping them as independent operations and brands supported by the power of the Apple global logistics, branding and design machine.

Are there other reasons that Apple should be considering this broader transformation? At the recent DLD NYC Conference, Scott Galloway identified that technology is a terrible business to be in because: “If you don’t reinvent it every year, your stock gets hammered”. He stated that “you want to be in a business that leads with your heart not your head, as it results in irrational wants and needs which in turn lead to larger margins”; he believes that the investment community has recognized this, giving Cartier as an example of having a larger market cap than Deutsche Telecom. Galloway identified that “the best neighborhood in the world is luxury” and although, in his opinion, Apple is the best house brand in the world, it’s in a bad neighborhood which can be a “terrible stock strategy”. He believes that Apple needs to transition its business into the luxury neighborhood in order to become a great iconic luxury brand and, in so doing, become the first trillion dollar market cap company. There seems to be strong evidence that Apple has already initiated this transformation with the appointments of Angela Ahrendts, former CEO of Burberry, and Paul DeNeve, former CEO of Yves Saint Laurent, into key positions within its organization.

The possibility is that the acquisition of Beats could be Apple’s fledgling step to creating not just a single luxury brand but a house of brands, similar to LVMH, with multiple appeal points for a broader global audience, rather than limiting their offering to a single brand or a single technology. The creation of a new techno-luxury house of brands supports Apple’s quest to become the first trillion dollar market cap company, and the company’s transformative strategy indicates a return to its historic reputation for unpredictability!

Steve Bell, President, KeySo Global LLC

The Trap of the Better Mousetrap

Tuesday, April 15th, 2014

5G Press ConferenceThe “better mousetrap syndrome” is where a basic, cheap, functional and familiar product is reinvented with something that does the same thing, but is potentially better and costs more. It’s a recognized trap for product designers and companies, and yet it still occurs.

Here are two examples of this syndrome that I recently experienced:

1. I was assisting an associate respond to a request for tactical marketing support for a new product from a relatively established company entering the fiercely competitive mobile space. The more we discussed this the more it became apparent that this company had a solution but didn’t really know the problem they were trying to solve. Their solution provided certain advantages /benefits but they hadn’t found out if these were something that their mainstream customers really needed or wanted.

Having been actively involved with a startup that offers a new technology solution to an age old problem, I have spent much time exploring the benefits of minimum viable products and the use of business model frameworks to best test and define customer needs and value propositions. It is therefore mind blowing to see that companies don’t learn from this process before rushing blindly into product development, market extensions or new products; or more significantly, close their ears when being informed about the folly they are about to commit.

2. During a 2009 visit to Mobile World Congress (MWC) in Barcelona the following astute observations were made about the mobile business by a colleague from outside the industry:

  • There’s a tendency to start with a technology and build it into a product, instead of starting with consumer behavior insight and creating a product to serve it.
  • This industry tends to approach development in a sequential manner: firstly, system and network decisions are made to accommodate long infrastructure lead times. Then devices and user interfaces are developed, next applications and services are developed and, finally, a consumer proposition is made – but this is often late in the development cycle when critical decisions have already been made.

These perceptive observations returned to me as I attended a press conference at this year’s MWC in Barcelona, when the EU sponsored initiative to create 5G was announced. At this same conference, and indeed over the past 12 months, I have heard and read nothing but moans and groans about the sorry business situation of mobile operators as voice revenues decline, data volumes increase and over the top providers piggy back on their networks, providing the messaging services that consumers want instead of operator provided expensive text and picture messaging services.

Has this industry learned nothing over the last 6 years? The OTT and software startups see the need to create a product and are, in the main, testing and refining their product and pivoting in accordance with lessons learned from consumers. The mobile industry, on the other hand, seems hell bent on creating a better mouse trap without checking that it’s something that the customer wants or, more importantly, is willing to pay for.

There are mechanisms that can bring consumer understanding to the forefront of the product development process; there are also business model frameworks that force holistic thinking about the solution, value proposition, and customer experience across all the business touch points. In some cases they are freely available and in others they are proprietary, but they are there for companies to explore. In today’s connected world, solutions shouldn’t be continually created for no known problem or for no identified customer need.

To learn more about effective approaches to more successful product development, contact us at info@keysoglobal.com

Steve Bell, President, KeySo Global

International CES 2014: A tipping point for the Internet of Things?

Tuesday, February 18th, 2014
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Cisco’s shopping cart

As predicted, the 2014 International Consumer Electronics Show simply overflowed with examples of IoT finally becoming a marketplace reality – from the connected home to the connected automobile to digital health – as well as large companies vying for the opportunity to merge cloud and mobile technologies with sensors and MEMS technology.

In his keynote presentation John Chambers, CEO of Cisco, predicted that “2014 would be the transformational pivot point for IoT” and that the total cost benefit going forward could be as high as $19 trillion for both public and private sectors. He foresees retail, for example, gaining at least $1.5 trillion in benefits from the implementation of smart shopping carts that both assist and track customers.

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FootLogger demo

The pace, scale and potential impact of IoT emergence has drawn attention from multiple interested parties associated with policy and regulations. During a panel discussion on this subject, FTC Commissioner Maureen K. Ohlhausen encouraged governments to better understand the effects and benefits of innovation on society, and to assess whether existing laws or regulations in the market place can right any potential threats. Adam Thierer, senior research fellow with the Technology Policy Program at the Mercatus Center at George Mason University, warned against the “precautionary principle” model which curtails innovation until it can be proven to not be a serious threat to society. He sees the EU as following this worldview in its approach to privacy and IoT, and he strongly endorses the principle of “permissionless innovation” fostered by the U.S. which deems that experimentation with new technologies and business models should generally be permitted by default. In reality, evolution of IoT will most likely be a combination of all three due to the explosive growth and diversity of the technology globally.

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FashionTEQ notification ring

In another session on MEMS and sensor fusion, Mike Luna, CTO of Jawbone, pointed out that technology on its own is not the key to success. Luna believes that the real challenge for companies such as Jawbone, Nike and Fitbit with their new wearable products will be ensuring that they seamlessly fit into consumers’ everyday lives. Key to this is making sure that they do not adversely react with bodily or external substances, so that they can just be worn and forgotten. Only then can consistent and reliable data be obtained from them and used in such areas as health, sports or general lifestyle enhancement. These new wearables not only communicate with smartphones but with one another and, according to Luna, are in effect creating the Internet of Me, where they become hubs for connection and exchange of data. For wearable technology to really take off I believe that people need to feel socially comfortable with it, and I was interested to see the large number of European, Asian and American companies pursuing the fashion vector for wearables, whether it was notification jewelry such as pendants and rings, or watches that blended style with technology.

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Multiple eyewear options

Rival eyewear products were also abundant at this year’s CES, some incorporating cameras that stream everyday life or automatically take pictures to create an individual’s video blog. Others focused on the industrial space, creating safety glasses with video streaming capability that can be used for training, diagnostic or quality assurance purposes, for example on a production line when a video recording of the process could prove useful. Add to this the increased use of augmented reality, as seen in Googles Glass, and the production and education environment of the future looks very different.

Judging by the technologies on display at this year’s CES, the future is closer than most of us realize. Conference speaker Rob Nail, CEO and Associate Founder of Singularity University, warned, however, that humans are not educated to cope with the exponential technology growth curve that we are currently experiencing. Worse still, he presented evidence that we have limited capability to forecast it. The good news is that, when we finally accept what’s happening, we apparently adapt very quickly! Over the next year it will be interesting to see if the Internet of Everything turns out to be the fundamental tipping point that keynote speaker John Chambers predicts, or if it’s merely one of many on the accelerating exponential technology curve referenced above.

Steve Bell, President, KeySo Global

Can Innovation Survive in the Telecoms World?

Wednesday, November 27th, 2013

From an innovation perspective, I have always been convinced that “the language we use defines the horizons of our imagination” and so it struck a chord with me when I read in a recent ITU document that “voice calls are no longer the preferred communication mechanism between people”.

This phraseology implies peril for the telecoms industry and a golden opportunity for the internet world. Voice is, however, still the preferred mechanism of human communication but voice calls via a fixed or mobile telephone system are now not the only option available.

This glass half full, myopic misperception leads me to suggest that the business models of telcos are overly focused on the delivery of “coms”. While this has been a highly successful strategy throughout the 20th century, it is rapidly running out of steam as the internet world and telecoms collide to create the new mobile cloud world of today.

Maybe we should learn from Max Frisch (1911-1991), the Swiss author and critic, who said: “We live in an age of reproduction. Most of what makes up our personal picture of the world we have never seen with our own eyes—or rather we have seen it with our own eyes, but not on the spot: our knowledge comes to us from a distance, we are tele-viewers, tele-hearers, tele-knowers”.

So is it time to pivot this focus? Given the colossal change that convergence has forced within a concatenated time frame, the answer should most definitely be “yes”. The challenge for the telecoms industry is to shift its mindset to focus less on the delivery of “coms” and innovatively focus on “tele”literally meaning “at a distance”.  This demands a focus on innovation that leverages the assets already in place, the layered technology developments of the last 5 years as well as the new ones that are emerging; most importantly, a focus on the evolution of global consumer and business usage needs and patterns. It means combining capabilities and services to “enable engagement over distance”. Now the question to ask is: what is it that tele-consumers and tele-enterprises really need in this 3.0 world?

As an entrepreneur, I have learned much over the past five years about the concepts and practices of lean startups, and I realize that some of the challenges they face are very often closely aligned to those of the telecoms companies: namely, having to pivot and adopt a change in strategy without changing the vision, as well as creating multiple iterations of minimum viable solutions to solve customers’ real problems. In essence, getting back to what mobile operators were doing naturally in the early days of cellular. This may require smaller out-boarded organizations but, more importantly, a return of the visionary leaders and problem solvers to replace the accountants and managers before they succumb to the same fate that awaits many startups – running out of resources!

In conclusion, the panel on innovation that I moderated at last week’s ITU Telecom World 2013 conference in Bangkok was about the need for new mindsets and a reevaluation of the telecoms landscape, chiefly because the current map and strategy no longer accurately represent a territory that has been ripped up by the convergence forces of the last five years. I have no doubt that innovation will thrive in the converged industry but the questions still remain: who will the players be and where will this innovation come from?

Steve Bell, President, KeySo Global

The Entrepreneur’s Paradox

Wednesday, July 3rd, 2013

The macro picture

Most people associated with business strategy and the challenges of cultivating innovation are familiar with a classic business book by Clayton Christensen called “The Innovator’s Dilemma”. In this seminal work, Christensen examines the impact of new technology on existing industry incumbents and the dilemma that they face in sustaining current business at the same time as embracing disruptive technology.

A recent business magazine article identified that the pace of disruption was accelerating as multiple technologies come together and as innovators constantly try to leverage these technologies for new goods and services. In most cases, the implementations fail but these failures have a significant benefit as they enhance the collective learning of both the innovators and the customers with each new product cycle. This learning aspect for customers is critical because they are becoming familiar with new experiences and technology. Consequently, when the right combination of experience and technologies is eventually created, the market is more receptive as customers are already familiar with it, meaning that the concept goes viral faster and becomes disruptive more rapidly.

In past blogs I have talked about the concept of “boundary blurring” between industries as the impact of combined ICT technologies changes the value propositions and business models of industries such as banking, health, retail and automotive. We have also described a phenomena we call “digital life” which is the osmosis-like process of digital technology absorption into people’s everyday lives. Most individuals do not recognize the degree to which they have adapted to the new technologies around them. However, the stage is set for the emergence of viral disruption in multiple industries in the next couple of years as entrepreneurs, small startups and companies within ICT see the opportunity to apply these new technologies.

The micro picture

Against this macro picture that I have been sharing through my consultancy work over the past 5 years, I have witnessed several opportunities for businesses to cross boundaries and create disruptive new products, services and business models. Together with a partner, I am now in the process of creating a new startup that applies hardware and software technology, systems thinking and creativity to an industry ripe for disruptive innovation. In developing this venture, however, I have stumbled across what I call the “entrepreneur’s paradox” which is the corollary to the innovator’s dilemma.

The paradox occurs because of the above mentioned macro aspects necessary to create ripe market opportunities: the customers are ready, the industry has old and established business models and market perspectives, and mobile and technology startup companies are winning early adopters.

To enter this industry it requires considerable time and investment to develop the product and value proposition. It also requires the exposure of the idea/product to investors, customers and potential partners in order to test the idea and to prove it can create a sustainable business model. Angel and VC investors are notorious for not signing confidentiality agreements in early stage discussions.  In other words, it requires putting the idea out into the public domain, which is the nub of the paradox, because it works against the other desirable attribute of a tech startup – namely, a patented product or idea.

In order to submit a provisional or full patent filing, and claim “first to file” status, it requires no prior public disclosure. So how do you know that what you are filing justifies the cost in terms of being able to create a viable business? And how do you know that the time you spend developing your invention isn’t going to be preempted by someone else fast-cycling a product concept with target customers? The paradox here is: should you file first or seek customer feedback first by creating a prototype product but, in the process, run the risk of the idea being stolen or preempted?

There is no simple resolution to this but as cycles of technology, learning and consumer adoption accelerate, they are bound to challenge the fine balance between the need and desirability for patents versus the finite market opportunity that may exist and needs to be proven. Not an easy decision to make!

Steve Bell, President, KeySo Global

Digital Awareness – a Critical Component for Success

Tuesday, April 2nd, 2013

A key pillar of our work at KeySo Global is the belief that digital technology has significantly impacted and changed the digital lives of every one of us, and that systems and business models are consequently having to adapt to meet multiple stakeholders’ expectations.

Business models are dynamic and unique, and are a reflection of historic development, management personalities, economic and business environments, customer and channel requirements as well as resource, assets and technology. As much as humans like stability, no business model stays the same, no matter how perfect it seems at the time.  In their 2001 book entitled “How Digital Is Your Business” Adrian Slywotzky and David Morrison compared the brilliance of the Dell business model with competitors like HP, Compaq and, at that time, struggling Apple. Dell spent limited amounts on R&D, leveraged a choice board for consumers to design their own PC, and outsourced manufacturing to Taiwan and distribution logistics to FedEx; this was seen as a virtue at the time when compared with HP, Compaq and Apple. Technology and a successful business model don’t guarantee success if a company doesn’t keep up with consumer need changes or fails to innovate. The focus that Apple placed on user experience changed the game; in recent news we’ve seen how Dell’s business model is now struggling to compete against the growth of smartphones, tablets and cloud services – particularly those of Apple.

Being aware and responding to developments around you is a significant and important part of senior management responsibility. We strongly advocate the interaction with external resources that will bring a different perspective to a business. Utilizing “thought leaders” or tools that allow the current situation to be viewed from a different vantage point can greatly strengthen a company’s thinking and focus. As the saying goes “no single event makes a trend” but the search, listing and assembly of data from multiple sources can enable companies to recognize emerging patterns and opportunities, particularly in complementary industries where competitive shifts in business models could be applicable.

Over the last few weeks I’ve observed in the news a number of noteworthy events that will, I’m sure, impact multiple industries. I’ve listed these below, together with what I believe are the broader implications for business.

Recent news events:

  • Online clothes shopping hit 10% of U.S. sales.
  • Macy’s overall sales increased by 11.7% and their online sales increased by 48.9%.
  • H&M and Inditex – European fashion retailers – are reported tochange their in-store clothing range every two weeks.
  • 15% of shopping malls will close in the U.S. over the next five years.
  • Amazon’s fourth-quarter sales were down but their margins increased.
  • Netflix develops streamed original content (House of Cards) targeted at “cord cutters” abandoning cable and satellite TV.
  • Traditional Procter & Gamble partners with crowd sourcing venture capitalists “Circle Up” for new ideas and innovation.
  • BSkyB in the U.K. introduces advertising based on localized demographics and TV program choice.

Digital implications for your business:

  • smartphones and tablets have changed consumer behavior patterns i.e. online couch shopping and mobile price comparison
  • traditional T.V. advertising is losing its effectiveness
  • the digital consumer expects broader and more frequently refreshed product lines
  • digital business models enable diverse competitive offerings
  • traditional business models now embrace crowd sourcing and funding

If they haven’t already done so, these implications and others like them are likely to impact your business model. My message here is that you need to become aware of digital change and be prepared to do something about it. Have you checked to see if neighboring industries and competitors are already responding to the urgent need to adapt? The big question is – are you? Are you ready to take the first steps towards adopting a digital strategy, one that will strengthen your competitive position in today’s digital marketplace?

We at KeySo Global can help. To discuss how you can structure a digital strategy innovation session, contact us at info@keysoglobal.com or visit our website www.keysoglobal.com

Steve Bell, President KeySo Global

Is Higher Education Set to Cross the Digital Frontier?

Tuesday, February 5th, 2013

Change usually only occurs when competing forces conspire to cause it or behaviors are adopted that necessitate it. Higher education and universities are ripe for change but they also have a tendency to resist it. These institutions have a long tradition of establishing prestigious courses and faculties, the cost of which in recent years has become prohibitive for the average student. The traditional model of students receiving instruction from and interacting one-on-one with learned professors has gradually given way to large over-crowded lecture halls, compulsory reading lists and standardized testing, as economics not excellence has shaped university education..

The impact that the digital age is having on everyday life is changing consumer expectations, and consequently challenging the established educational model. The widespread availability of wireless broadband, mobile devices, video lectures and online course material is facilitating the “massive online open course” (MOOC) which is accessible to large and diverse groups of students. The high cost of full-time education and the uncertainty of employment mean that many young people today are looking to work and study in parallel – and MOOC offers the ideal solution. It also supports those who are looking to supplement their existing education and skills and are more interested in gaining knowledge than qualifications.

Tablets and e-readers, according to McGraw-Hill, have the ability to transform not only the textbook and the individual educational experience but also the whole testing process. During a presentation at this year’s Consumer Electronics Show, McGraw-Hill described “LearnSmart”, their new adaptive technology program where a student reads a digital textbook on a tablet or e-reader and is asked a series of on-going questions that assess their understanding of what they have read. Subsequently their reading materials are adjusted according to their level of knowledge and understanding.  On this basis, a room full of students or an online group reading a text will all be receiving highly personalized and tailored instruction to help them attain the same required level of understanding. By tracking the results, answers given and also a student’s keyboard strokes it is possible to ascertain and validate their individual performance for the purposes of testing and certification.

The digital and online world is reshaping our cognitive capabilities and, according to some experts, using the Internet to search for information is causing us to “externalize” our memories rather than having to use them to process and store information. While enhancing our logical capabilities, the online world is also hindering our ability to develop the skills of empathy – an emotion that has apparently shown a decline in young people. Empathy is learned over time through social interaction and by reading others’ facial expressions, so if face time is replaced with Facebook time, the implications for enhanced interpersonal skills and moral decision-making could be significant.

One of the advantages of a traditional university education is that it enables young people to interact and develop social skills. In a recent article about Michael Bloomberg, Mayor of New York City,  it was pointed out that an average C-student attending Johns Hopkins University in the early 1960s – which he was – could be transformed into a social and political star through the interactions, experiential learning and networking skills that are an integral part of a four-year residential education. With increased applications for MOOC courses, the new digital educational environment needs to be reconsidered and other options need to be examined. These could include the utilization of enhanced virtual reality conference facilities that enable virtual face-to-face experiences and networking opportunities that supplement real-world social interactions.

Whatever happens, the shape of education and learning from pre-school through to university and beyond is likely to change dramatically over the next five years as the pace of technological progress continues to accelerate and people adopt it more readily into their lives.

Steve Bell, President, KeySo Global

www.keysoglobal.com

Consumer Electronic Trends to Watch – Live Report from CES in Las Vegas

Monday, January 7th, 2013

Shawn DuBravac,  Chief Economist and Director of Research for the Consumer Electronics Association (CEA) identified in his keynote address at the Consumer Electronics Show (CES) in Las Vegas yesterday four critical trends that will shape the future of the consumer electronics industry.

The Post Smartphone Era

Penetration of smartphones in the U.S. has surpassed the 52% mark but more significantly tablets have doubled their penetration in just 12 months, moving from 22% to 44%. In today’s digital world where multiple devices are commonplace in every household, these effectively act as hubs. They are mechanisms for accessing additional technologies, from door locks to health and fitness applications, and act as “second screens” for controlling security, domestic appliances, cars and TV’s. DuBravac referred to smartphones and tablets as “viewfinders into our digital lives”.

The Age of Algorithms

Prior to 2001 most information captured was analogue. With the continual reduction of cost for processing and sensors, more and more devices now have the capability to collect, communicate and share information digitally. In the U.S. there will be 350 million IP addressable devices sold in 2013 and about 1 billion worldwide. In reality, the cost curve of technology is enabling the “sensorization” of devices. The challenge in the future will be curating the enormous density of data-strings that will be generated as sensors proliferate.  Participating at this year’s CES are a record number of automotive companies, reflecting the growing interest of the industry in the role of sensors and connectivity. The fact that the Google car drove 300k miles last year and that Audi, Lexus, Ford and several others are focusing on this area of technology is an indication of how significant it could become. The Chairman of Continental has said that a driverless commercial solution is possible by 2025. In this age of algorithms, data is the new currency which raises ever more concern about security and privacy.

Contextual Connectivity

In recent years, the mood of the industry was captured by the advent of smart TV’s that could connect to the internet. Now the focus is on using intelligence received from sensors to make the interaction between the smart TV and the consumer more relevant and appropriate. One example is the use of cameras that monitor who is watching a program to ensure that appropriate advertising is screened when children are present; another are glass panes in store windows that display information tailored to the individual who is walking past that store, based on their smartphone details shared via social media, store card check-ins or through NFC payments.

Changing the Flow of the Story

The prevalence of “second screens” indicates that we are becoming digital omnivores who consume secondary information while watching a primary screen or previews prior to selecting a program. With household penetration of tablets and smartphones hitting 1.4 per household in the U.S. in 2012 (compared with 2.9 TV’s per household), the second screen is a real phenomenon.  In fact sales of small screen TV’s have declined 20 to 30% in the last 3 years. The concept that engagement starts on the second screen means that the paradigms for use-case scenarios are rapidly changing and need to be understood by the content providers, networks and advertisers. The story may not start on the big screen but when it reaches it the challenge is to maintain engagement and interaction on the second screen. Interestingly, sales of jumbo screen TV’s for main living spaces are on the increase in the U.S.

What becomes evident from these trends is that consumers’ rapid adoption of technology into their digital lives is changing their expectations and forcing business models to adapt accordingly. It appears that, even in the consumer industries, many large companies are being slow to respond and the bulk of innovative ideas and add-on products are being generated by hybrid start-ups.

Steve Bell, President, KeySo Global

www.keysoglobal.com

Why Mergers and Acquisitions Come Unstuck

Sunday, October 21st, 2012

I recently re-read the book “Unstuck” by Keith Yamashita and Sandra Spataro. The “unstuck” model focuses on the need as a leader to create balance in the system of business in order to be able to succeed. Leaders need to unify the following six elements: strategy, purpose, culture, personal interactions, structures and processes, rewards and metrics. According to the authors, the inspiration for this model came from two sources: a “classic Friday afternoon conversation” with a former CEO of HP Carly Fiorina, and David Nadler and Michael Tushman’s “congruence model” for organizational effectiveness.

At about the same time, I serendipitously came across an article in the Financial Times (HP counts cost of ill-fated acquisition – August 10, 2012) lamenting HP’s turnaround efforts and how they failed to leverage a decade of acquisitions that included Compaq in 2001, EDS in 2008 and Autonomy in 2011. This led me to review the “unstuck” model which in turn prompted me to redraw it in relation to acquisitions, as shown below.

The fundamental logic of acquisitions is usually financial, along with market share and growth, and is based on synergy of strategy. In most cases the senior management team and investment bankers make the case seem undeniably persuasive. However, the reality is that in the short term this synergy of strategy is the only element of the model that is in fact in alignment in a converged company. After the acquisition closes, all other aspects of the model can go off balance. It is a little bit like thrusting two atoms together where only one of the neutrons can survive; all elements of the model will go through a period of adjustment with the probable outcome being that the elements of the acquiring company dominate. This is not guaranteed, however; there are other possibilities, particularly in a merger, that can play out over time, including the blending of elements or the creation of a hybrid that takes the best of each of the originals to create a new component.

This behavior of acquisitions over the long term became all the more relevant in light of the recent proposed but failed merger of EADS, the makers of Airbus, and BAE, the UK defense contractor. The main thrust of their argument for merging was the ability to create an effective competitor in terms of size against the U.S-based company, Boeing. The biggest concerns being surfaced were related to the agreement of a new ownership structure and the consequential reduced political influence of the 3 governments. In theory, the new combined company would have been free to compete with Boeing, however based on the above model and perspective, I think that the challenges for this company would have been enormous and long term; not only in terms of political interference but also cultural differences as it attempted to integrate people and create a unified purpose.

Size alone does not guarantee success, particularly where multicultural aspects are embedded in the character of the company, as has been proven by HP and Daimler-Chrysler. The short term benefits of size and financial growth struggle to offset the long term challenges of balancing other elements of the model. The resulting company will often take years to achieve a rebalance. Given this scenario of multicultural challenges on the model, it is doubtful that the recently announced acquisition of Sprint by Japan based Softbank will result in instant success in the market for the company. The Japanese propensity for long term thinking and patience, however, will probably mean that the resulting company will have a better chance of success than many others. In the case of both HP and Daimler-Chrysler they never managed to achieve this; in fact the anticipated advantages from a market and financial perspective were never translated into market success nor shareholder value.

If you’re interested in learning more about how our business models and processes can facilitate strategies that “stick” contact us at info@keysoglobal.com.

Steve Bell, President, KeySo Global

Catalyst Technologies and their Global Impact

Thursday, September 20th, 2012

In this third blog we look at the implications of the catalyst technologies we identified in our last blog, and determine why they have become so important. In his book “What Technology Wants” Kevin Kelly identifies that “the ever thickening mix of existing technologies in a society create any supersaturated matrix charged with restless potential”. We have written extensively about the digital world which is the combination of technologies that are shaping our world and digital life which is the effect that these technologies are having on everyday life. Kelly again reinforces our perspective when he says that we as a society are “symbiotic with the technology” and that as fast as we invent technology, we change our behavior and become dependent upon it.

Instant Markets

The current global economic turmoil did not come about by accident, but is in fact a consequence of today’s society being able to instantly communicate and share information. In other words society has changed behaviors and has become increasingly dependent on converged technologies. The use of internet trading platforms, for example, with Twitter users virally sharing the latest snippet of information is compounding the application of sophisticated trading algorithms (flash trading). The fact that the U.S. is now leading the way in the deployment of 4G mobile Internet makes the realities of the 2008/2009 Wall Street collapse pale into insignificance as the next wave of technologies facilitate “anytime, anywhere, anyhow” trading and speculating based on viral information.

Controls Lag

More recently the global LIBOR banking scandal, on top of the Euro crisis, points to the fact that we as an international society are struggling to come to grips with and learn what control mechanisms will work in this volatile and real-time world. Compounding this is the problem that we have not yet come up with a common language to document the necessary global beliefs and values that are required to guide policy regulation, monitoring and correction of this 24/7 digitally trading world.

Inextricable Interdependence

The U.S. has struggled to interpret the current rapidly changing and unpredictable global situation, mainly because it finds it hard to accept the fundamental changes that have been occurring on its own soil. A recent Financial Times article identified that the U.S. is now significantly more interdependent on the global economy than it was 31 years ago, at the outset of the shift to Digital Renaissance 2.0.

At that time, in 1981, the U.S. was a relatively closed and self-sufficient economy as measured in terms of trade of goods (import/exports) as a percentage of the U.S. gross domestic product. U.S trade represented only 21% of GDP and was made up of 10% exports and 11% imports. By 2012 this had grown significantly to approximately 32% of GDP – exports accounted for 14% of this and imports 18% – putting the U.S. on a par with the global average as an open economy.

Consequently the U.S. belief in self-reliance and independence now needs to be replaced with the realization, not only in terms of stock market indices but also as an economic reality, that it is inextricably tied to the Euro crisis, the emergence of the BRIC countries (Brazil, Russia, India and China) and the struggles in Africa.

Collaboration & Knowledge

The original Renaissance in Europe resulted in the disappearance of principalities and kingdoms, and ushered in the emergence of a nation state, which was followed during the industrial age with the emergence of overlapping market states. The question is how will the world evolve and will market states be the future societal organization? There are a number of theories about the organization of society going forward (Philip Bobbitt, David Ronfeldt, are two such theorists and this article compares their position with those of others). Regardless of which theory prevails, it is highly likely that in the world of Digital Renaissance 2.0 networking, collaboration and knowledge will be critical components of its underlying architecture. It also seems probable that global communities, digitally connected and potentially proactive, will coexist alongside and within hierarchical organizations, both in government and also in industry.

Ren 2.0 Man – Techno Artisan Craft Society

Digital Renaissance 2.0 was founded upon four enabling technologies and was exponentially accelerated by the catalyst technologies that released the restless potential of other technologies, such as cloud computing and Web 2.0. Ren 2.0 is now embracing a raft of emerging technologies, like NFC, voice recognition and kinetics, which are giving rise to business models not previously conceived. For instance 3-D printing is enabling designers / entrepreneurs to create new product concepts from digital files more rapidly and cost effectively than ever previously thought possible. Coupling this capability with global internet access and mobile commerce, Ren 2.0 now allows others to market this product concept globally.  Personalized products for the “market of one” are created by transmitting customized product specifications to printers anywhere on the planet and in close proximity to the consumer. To a large degree these hybrid technology and commerce systems facilitate the reincarnation of the craft society that got lost in the industrial age. These techno artisan craftsmen are in many respects the Digital Renaissance 2.0 men/women of the new digital era who are living, working and trading in global communities of trust, practice and purpose.

In prior blogs we have discussed the concept of “digital agents of change” and shown how critical this role has become in today’s digital business world. In some respects we all now need to become digital agents of change for the global society, or to use the words of Mohanda Gandhi “we must be the change we wish to see in the world”.

Steve Bell, President, KeySo Global

www.keysoglobal.com