Here's a flash of the blindingly obvious: More and more products are going digital. You know this, but what I'm interested in is how they are going digital and to what degree. I see three major aspects: (1) the product itself becomes digital; (2) a physical product adds digital technology; and/or (3) processes and context around a physical product become digitally infused. Let me offer a sort of continuum of examples, and then I want to ask a question:
Music (nearly 100% digital). The greater part of music bought these days is in the form of a 100% digital product.
Health band. With a health band (e.g., Fitbit, Nike FuelBand), I don't really care about the physical product, but I'll put up with it to get the digital benefit: lots of data (and more) about my workouts and health.
Cameras. A digital camera is a physical product that uses a combination of physical and digital technology, and I actually care about some of its physical design (e.g., lenses). It produces a 100% digital artifact (photos), and the process around the photos is digitally infused.
USB picture frame. Part physical, part digital. By replacing the center of a picture frame with a digital screen, I get a new twist on an old standby. But, working with the digital part still requires a high degree of physical manipulation (carry a USB drive to the frame, etc., etc.).
WiFi picture frame. Part physical, even more digital. The WiFi bit bumps it way above a USB picture frame in terms of seamless integration into a digital world. I can email a picture to the thing, or maybe tag a photo on Facebook and suddenly it shows up.
As a product strategist, do you struggle with a sluggish innovation “process” in your firm? Do you think it takes too long to identify great ideas and turn those ideas into compelling new products and services for your customers? If you’re like most of your peers, the answer to both questions is probably a resounding "yes." That is exactly why Forrester’s Consumer Product Strategy practice developed The Open Innovation (OI) Playbook.
Forrester defines open innovation as:
The act of innovating, whereby new ideas or methods are requested from three broad participant groups: employees, partners, and customers.
This approach to innovation is in stark contrast to the typically closed and often secretive product innovation practices that most firms still use today. Our OI playbook provides you with an end-to-end framework, organized in twelve easy-to-find modules, and designed to give you the insight, tools, and best practices that you need to successfully adopt an open innovation approach within your organization.
To get started, I suggest reading the Executive Overview: “Revolutionize Products And Services Through Open Innovation”. This report will set the stage at a high level for you. Then, depending on where you are in your open innovation journey, you can “pick your spots” by navigating directly to the most applicable chapter for your needs. In general, the OI playbook is divided in to four phases as follows:
I recently finalized a report* on software asset (SA) based IT services, this time looking at vendors’ best practices in terms of governance, organization, skills, tools, and processes. Needless to say, the move to software asset-based services will have a huge impact on the traditional operating models of IT services firms.
Obviously, IT services firms need to learn from their large software partners to understand and implement specific software asset management processes such as product sales incentive schemes, product management, product engineering, and release management.
This will induce a formidable cultural change within the IT services vendor’s organization, somewhat similar to the change Western IT service providers had to undergo 10 years ago when they finally embraced offshore delivery models.
I see a few critical steps that IT services firms need to take in order to facilitate this shift towards software asset-based business models:
Build a client-relevant SA strategy. Building an SA base offering is not (only) about doing an inventory of the existing intellectual property (IP) that you have on employee hard drives and team servers. More importantly, it’s about making sense of this IP and building strategic offerings that are relevant to your clients by centering them aounrd your clients’ most critical business challenges.
Next month, I will be relocating to Singapore after two years in India. These two years have been an amazing learning experience for me, both from a personal and professional point of view. A very intense experience too! Of the few Hindi words I learned during my stint in India, there is one that I am particularly fond of: “jugaad,” which can be translated as “making things work.” This is one way to summarize what India is all about — and why India works as an economy, in spite of the gods and despite all of the challenges that India currently faces as a society.
This concept has taken on a lot more importance on the global scene in recent years from an innovation management point of view. A former Forrester colleague has recently coauthored a book about the concept and how it could “reignite American ingenuity.” The economic and ecological crises that we have been through over the past few years call for new ways of approaching economic development and growth. And the “jugaad” concept could bring interesting solutions to our modern societies.
SaaS vendors must collect customer insights for innovation and compliance.
As of the end of last year, about 30% of companies from our Forrsights Software Survey, Q4 2011, were using some software-as-a-service (SaaS) solution; that number will grow to 45% by the end of 2012 and 60% by the end of 2013. The public cloud market for SaaS is the biggest and fastest-growing of all of the cloud markets ($33 billion in 2012, growing to $78 billion by the end of 2015).
However, most of this growth is based on the cannibalization of the on-premises software market; software companies need to build their cloud strategy or risk getting stuck in the much slower-growing traditional application market and falling behind the competition. This is no easy task, however. Implementing a cloud strategy involves a lot of changes for a software company in terms of products, processes, and people.
A successful SaaS strategy requires an open architecture (note: multitenancy is not a prerequisite for a SaaS solution from a definition point of view but is highly recommended for vendors for better scale) and a flexible business model that includes the appropriate sales incentive structure that will bring the momentum to the street. For the purposes of this post, I’d like to highlight the challenge that software vendors need to solve for sustainable growth in the SaaS market: maintaining and increasing customer insights.
Last week I attended Telefónica’s leadership event, which is held annually in Miami, reflecting its very strong basis in the Americas. This year’s event attracted around 700 visitors from 130 countries, comprising Telefónica’s customers, vendor partners, and analysts. There were several external keynote speakers, like the CIO of the US government, futurologist Michio Kaku, and the chief economist of the Economist Intelligence Unit, that outlined the macro context for society and the economy over the coming 10 to 20 years. Presentations by partners like Huawei, Microsoft, Nokia, amdocs, and Samsung highlighted visions of the future from a vendor angle. Telefónica itself used the opportunity to present its own vision of how technological progress will affect society and business — and how it intends to address the opportunities and challenges ahead.
Telefónica stands out from its peer group of incumbent telcos by having revamped its overall organizational structure. The firm had already announced this new structure last fall; it effectively sets up one division that focuses on global internal administration and procurement (Global Resources), one division that focuses on emerging Internet-based solutions (Digital), and two geographically focused go-to-market-facing business lines (Americas and Europe). Telefónica Multinational Solutions is part of Global Resources and is the division dedicated to delivering services to the MNC segment.
There are a number of firms that we watch closely at Forrester because they stand out for sustained innovation. Behind the technology giants like Google and Apple, there are a number of established firms that are using technology to adapt rapidly and successfully to changing customer behaviour and needs. One of them is Commonwealth Bank of Australia. Over the past four to five years CommBank has introduced a series of digital innovations to serve its customers better including:
Finest Online. In the course of its "Finest Online" project from 2007 to 2009, CommonwealthBank of Australia redesigned its NetBank Internet banking service with the objectives of building an excellent customer experience and driving online sales. The bank implemented new content and functionality to support the customer journey and integrated new secure site sales processes with in-person channels and the bank's multichannel customer relationship management (CRM) system. The two-year, cross-organizational project boosted online sales, increased customer satisfaction, and improved the bank's image. (Forrester clients can read our case study.)
For those of you who aren’t familiar with Finovate, it’s a fast-paced format with seven-minute live demos and pitches from 35 financial technology vendors. It’s produced by Online Financial Innovations, the people behind the excellent NetBanker blog.
I was lucky enough to go along to the show in London today. Unlike last year, when four or five themes dominated the day, this year’s exhibitors were more diverse. Among them were:
I attended Trend Forum 2012 last week in Bonn, effectively an analyst day where Deutsche Telekom presented its innovation strategy. There was no focus on overall group strategy. Still, innovation matters greatly as part of the repositioning efforts of telcos. As the role of telcos in the value chain is weakening, largely due to increasing competition by over-the-top providers (OTTPs), telcos need to differentiate themselves increasingly via service provision and their ability to innovate quickly and prolifically. Failure to do so will cement their status as transport utilities for OTTPs.
Deutsche Telekom’s Core Beliefs focus on: a) building its platform business by partnering with software firms; b) leveraging the cloud by providing high QoS and secure connectivity; and c) leverage differentiating terminals through device management and customer experience provision. These Core Beliefs form the basis for pursuing its focus growth segments in digital media distribution, cloud storage, cross-device digital advertising, classified marketplaces, and mobile payment in addition to the core telco business. These targets match up well against our evaluation of best cloud markets for telcos.
A defining characteristic of next-generation network (NGN) infrastructure and the move towards cloud-based business models is openness. As a consequence, OTTPs increasingly deal directly with end customers across the network. Relationships between telcos and other members of value chain become more complex. Emerging cloud services by telcos need to become network agnostic to deliver cross-network solutions and ensure cloud interoperability. Deutsche Telekom has made significant progress in the recent past to adapt its strategy to these new telco realities.
Ah, Black Friday: What would the post-Thanksgiving shopping bonanza be without a visit to the local mall? This year, I was keen to perform some gumshoe research on a theme I've been talking about all year long: mass customization, a product strategy that's ready for prime time across multiple industries.
A trip to the Natick Mall (yes, "Mall," no longer "Collection," New Englanders) reveals that mass customization isn't just the future; it's the present. In fact, it's hiding in plain sight. Build-a-Bear Workshop, Hallmark, Lego, and LensCrafters are all stores in the Natick Mall that offer significant customization for consumer products. Burberry is the latest Natick Mall vendor to offer mass customization; I am quoted in Time magazine this week (here, but subscription required to view the link; page 82 in the December 5 paper edition) discussing how luxury clothing and customization fit together well. As I've written before, one of the benefits of employing mass customization is that it empowers consumers to create products that express their personalities -- a particularly relevant feature for clothing and apparel products.