"When will Google launch a bank and what will it look like?" is a question I frequently hear from our banking clients. Google’s activities in digital wallets and payments, as well as its reputation as one of the most disruptive firms in the market, have obviously left many banking executives worried. Unfortunately, they’re asking the wrong question.
I’ll leave aside the issue of whether Google or perhaps Apple or Amazon should be the focus of this increased attention. Each of these players has its unique strengths and growth plans, and some of these correlate more or less closely with financial services. That’s not what makes the question so wrong. As I write in my new report, it’s the assumptions that are faulty here; assumptions that reveal precisely the type of legacy mindset that makes many retail banks so vulnerable to disruption.
Many retail financial firms still haven’t grasped the full potential of digital disruption. They think that new competitors will use their digital might to beat them at their own game, be that through more efficient processes, brilliant algorithms or better user experience. While these three things do matter, what matters most is the purpose which they serve. As I have written elsewhere, digital disruptors like Google are disruptive because they don’t play by the rules. Instead, they use digital technologies to deliver better or entirely new ways of meeting customer needs, often bypassing regulation and re-defining a given industry in the process.
Pop Quiz: If your company has conquered North America and Western Europe and is now looking for the next big market, where should you go? The no-thinking, because it’s obvious, answer is of course China. But if you want low cost of entry and a rapid return on investment you might want to aim a bit further South - to Australia.
While it isn’t as big a market as China (or even India) and may have a higher cost of living, which can make establishing a beachhead there expensive, Australia has significant enough similarities to the western world — a well-educated populace, a high income citizenship and desire for new technologies and innovations — to make success here far easier. And if you are doing ROI calculations around this decision, it has a key advantage over its Asian peers: higher acceptance of cloud services.
I had the opportunity and privilege to get an early look at the new Amazon Fire phone. It delights in many ways, but I’ll focus on the shopping experience enabled through Firefly.
For those who may not remember, Amazon put a dedicated physical button on the left hand side of the phone that launches directly into image recognition. If the image is recognized, then a web-based mCommerce experience launches. The user can then buy the product or it on a wish list, among other things. From there, the experience is more ‘traditional Amazon.’ The ‘new’ is the image, email, URL, etc. recognition.
Why is selling mobile phones important for Amazon? mCommerce in the US alone will add up to nearly $100M by the end of 2014. The new battleground for retailers is in the mobile moment – the point in time and space when a consumer pulls out her phone to get something she needs immediately and in context. Amazon’s FireFly service facilitates two core types of mobile sales moments:
Impulse Sales Moments – these are often flash sales (e.g., WTSO.com, SteepAndCheap, etc.) or spontaneous purchases (e.g., Groupon). The opportunity for Amazon here is in minimizing the friction between consumers seeing something they want, and enabling them to buy it before they forget about it, or find it later in a store nearby.
Replenishment Sales Moments – the phone (or something like an Amazon Dash) is with me when I realize a shampoo bottle or milk is empty or I need more toothpaste.
With the launch of Firefly, Amazon has the opportunity to create millions of what Forrester calls impulse sales moments. These are the mobile moments when I pull out my phone and make an unplanned purchase – even if it is for something that I need. Impulse sales moments are one of the leading mCommerce opportunities, which we detail in our new book, The Mobile Mind Shift. They include flash sales, sales of diminishing/remnant inventory, or sale of goods that I would have otherwise forgotten to buy. WTSO, Backcountry.com, and Gilt all use this tactic.
How often have you seen something you wanted to buy only to later forget? Sometimes it is as simple as milk at the grocery. Other times it is the latest kitchen gadget at your friend’s home.
Yesterday, Amazon announced its new Firefly service (and hard button on the Amazon Fire Phone). As a consumer, you point your phone at an object or hold it to listen to music, and the Firefly service will identify the product, music, or video. Amazon uses a combination of optical or audio recognition.
Buying products on Amazon – especially for Prime members – is already low friction with 1-click purchase. Firefly takes even more friction out of the process.
Yesterday HP announced that it will be entering into a “non-equity joint venture” (think big strategic contract of some kind with a lot of details still in flight) to address the large-scale web services providers. Under the agreement, Foxcon will design and manufacture and HP will be the primary sales channel for new servers targeted at hyper scale web service providers. The new servers will be branded HP but will not be part of the current ProLiant line of enterprise servers, and HP will deliver additional services along with hardware sales.
The motivation is simple underneath all the rhetoric. HP has been hard-pressed to make decent margins selling high-volume low-cost and no-frills servers to web service providers, and has been increasingly pressured by low-cost providers. Add to that the issue of customization, which these high-volume customers can easily get from smaller and more agile Asian ODMs and you have a strategic problem. Having worked at HP for four years I can testify to the fact that HP, a company maniacal about quality but encumbered with an effective but rigid set of processes around bringing new products to market, has difficulty rapidly turning around a custom design, and has a cost structure that makes it difficult to profitably compete for deals with margins that are probably in the mid-teens.
Enter the Hon Hai Precision Industry Co, more commonly known as Foxcon. A longtime HP partner and widely acknowledged as one of the most efficient and agile manufacturing companies in the world, Foxcon brings to the table the complementary strengths to match HP – agile design, tightly integrated with its manufacturing capabilities.
Google acquired Nest for billions, and then Facebook spent several more billion on Oculus VR. We’re only a few months into 2014, and already billions have been spent by some of the world’s largest digital players, with each of these companies eager to own the next big thing. Mobile is right here, right now, but everyone knows that very soon, there will be something else. But what else?
In the battle to find and claim the next device that everyone will want, these companies will soon realize that next big thing is not a thing at all: It’s your voice.
Voice control suffers from the same things plaguing augmented reality or virtual reality: It has been around for so long that we think we know what it is. Any fan of Star Trek: The Next Generation knows that voice control involves invoking an invisible computer with a command, “Computer,” followed by a query, “How many Klingons does it take to screw in a light bulb?” Maybe that’s a question you don’t want the answer to, but the computer — as voiced by Majel Barrett in the TV series — would know it.
It’s possibly a long history of popular depictions of voice control that made us collectively show so much enthusiasm for Siri when Apple first debuted it in 2011. It’s also partly to blame for why we quickly turned on Siri, declaring her soothing semi-robotic tones to be merely amusing at best or irrelevant at worst.
When Microsoft recently announced its long-rumored Cortana voice service for Windows Phone 8.1 as a catch-up to both Siri and Google Now’s own voice interface, the interest was modest, perhaps because if Siri hasn’t changed the way millions of Apple users use millions of Apple devices, how can Microsoft initiate a wave of behavior change when it has so few Windows Phone users?
Lenovo’s made three strategic moves in just one month: 1) Buying IBM’s x86 server business, 2) Reorging into four business units – most importantly including one called “ecosystem and cloud group”, and 3) Buying Motorola Mobility. The later two are driven by the mobile mind shift – the increasing expectation of individuals that they can access information and service, in context, in their moment of need. Smartphones are central to that – as are the ecosystem and cloud services that deliver value through the smartphones.
Lenovo has stated intentions to become a leading smartphone maker globally, building on their leading position in the China market. Buying Motorola Mobility is a much quicker way for Lenovo to access the premium smartphone market with a leading Google Android (not forked Android) offering - than trying to do it with their existing design teams and brand reach. Using Motorola, just as Lenovo used the IBM ThinkPad brand, to gain quick credibility and access to desirable markets, and built critical mass makes a lot of sense.
But Motorola has not been shooting the lights out with designs or sales volumes in smartphones. So the value is simply in brand recognition to achieve market recognition faster - and to dramatically expand the design and marketing team with talent experienced at US and Western markets.
Google’s acquisition of Nest has stirred a lot of interest and reaction, some of it misguided. After talking to lots of reporters, here are ten quick thoughts on why Google bought Nest and what it means:
1. Google bought Nest for talent and strategic perspective, not products or data. Nest is too small and not scaling fast enough to justify the acquisition. This is about getting a great team that can teach Google about a new market realm, how the Internet of Things comes into the Connected Home.
2. The price is ridiculously high – unless Google gets a huge head start on Connected Home. Google’s acquisition of Waze for $1 billion and Nest for $3.2 billion look pricey – but they are strategic bets for the long run, and can’t easily be compared.
3. Building the next generation of Google Now is the goal, not snooping on our temps, room locations and smoke alarms. The Nest Labs team will help fuel development of the next generation of Google Now as it shifts more toward proactive assistance and advice.
4. Google’s aim is to get an early start on identifying and adding software interfaces (APIs) to Gmail/Google Drive that connect it to smart products. This is not about Android in the home or about a battle for the device OS – it’s a battle for whose cloud service platform will coordinate an individual’s smart products – and their digital self.
5. Identity, privacy, and security will also crucial in building out the Connected Home. Blanket privacy policies won’t be enough. Fatemeh Khatibloo’s research on contextual privacy shows the new way that privacy and identity will have to be managed.
How much stuff do you own? The answer for most people ranges from a few changes of clothing to a large house full of possessions – your material self. It turns out that most of us also have a digital self – the information and items we create or that others collect about us. It is your footprint, your impact on the digital world. Without a digital self, you don’t exist in the world of computers and the Internet.
The era of Internet has spawned riotous new forms of business disruption as cheap tools and services combined with Internet reach and social media have empowered anyone on the planet to compete with the largest, most established businesses. James McQuivey’s reports and book on digital disruption highlight the fast rise of new hardware devices such as Microsoft’s Kinect and Apple’s iPad, and the fast mainstreaming of new Internet services such as Dropbox, Twitter, and Facebook. Companies in the business of retail, books, movies, and music have been toppled or transformed, with more to come.
In “Competitive Strategy In The Age Of The Customer,” Forrester shows that “in a world where empowered customers are disrupting every industry . . . the only sustainable competitive advantage is knowledge and engagement with customers.” This is not about mere customer centricity. This is about customer obsession.
This customer obsession is particularly crucial in the world of big-box and online retail. With so much pricing and product information available at customers’ fingertips — at home and in the store — retailers are highly vulnerable to price undercutting and switching. Big-box retailers compete fiercely on price, and providing good value is a customer requirement. But our research shows that to be a leading retail brand, retail marketers must differentiate through the promise and delivery of superior customer experience.
In May 2013, Forrester conducted Consumer Technographics® research with 4,575 US online adults to uncover the drivers of a successful 21st century big-box retail brand. This research is part of Forrester’s TRUE brand compass framework designed to identify which brands are winning the battle for consumer mindshare and to help marketers build a brand that is trusted, remarkable, unmistakable, and essential (TRUE). This framework has two core components:
The TRUE brand compass ranking gives a snapshot of a brand’s resonance — the emotional connection a customer has with a brand. Is your brand a trailblazer — winning consumer mindshare — or astray — lost its way and connection to consumers?
The TRUE brand compass scorecard reveals a brand’s progress along the four dimensions. Is your brand strong on being trusted? Weak on being essential?