Facebook Violates Rule #2 Of An Insights-Driven Business: Marry Algorithms And Expertise

Facebook can't buy a break with its newsfeeds. Every time it changes the model, somebody complains. But its latest snafu -- turning over the job to an algorithm without expert oversight is not the answer. Posting a fake story just isn't smart. It's not insights-driven; it's head-in-the-sand.

(The provenance of this image is opaque. If you own it, please let me know so I can attribute it properly.)

An insights-driven business is built differently and operates differently. As we say in our report

  • Rule #2: Marry algorithms and expertise to continuously improve outcomes. Algorithms are not a secret sauce; they are a model of the real world. If the algorithm says X and the expert says Y, then there's room to improve either the algorithm or human understanding. Innovators like Allstate Insurance (and Memorial Sloan Kettering Cancer Center) accomplish this by putting product experts (or oncologists) and data scientists in a room to continually refine their cognitive assistants. (see endnote 9)
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Google Will Attack Popup Ads On Smartphones -- Hallelujah!

We've all experienced this garbage:
 
  1. You are on your smartphone.
  2. You find a link that you hope will help you in a mobile moment.
  3. You click with the great hope that it will be exactly what you need.
  4. Some irrelevant popup ad grabs you by the arm and blocks your path.
  5. You suffer through the ad or the countdown before getting to the site. (And feel angry or bad doing it.)
  6. Now you finally find out: Does the website help or have you clicked in vain?
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Insights-Driven Businesses Will Make $1.2 Trillion In 2020. Wanna Join Them?

You can't win, serve, and retain powerful customers without being insights-driven. It's one of the principles of customer obsession: customer-led, insights-driven, fast, and connected. So what does it mean to be insights-driven? We think we know based on conversations with over 50 companies over three years. 
 
We have identified 40 public companies and a horde of venture-backed startups that work in a fundamentally different way: They harness and apply data at every opportunity to differentiate their products and customer experiences. That makes them faster and fleeter than you. In fact, using data from PitchBook and Morningstar, we forecast that, collectively, these insights-driven businesses will make $1.2 trillion dollars in 2020 (see the first figure).
 
What does it mean to be insights-driven? It's easiest to see by example. What if you could:
  • Optimize the driving experience by mining car performance data for insights to continuously improve car software? Tesla does.
  • Improve student loan re-financing prices and risk by finding insights in a borrower's credit card transaction history, college, and grades? Earnest does.
  • Win a football championship by gathering data and using insights to improve recruiting, training, and half-time pep talks. FC Midtjylland does.
  • Earn the best on-time arrival of any major airline by measuring when the airplane door closes -- and everything leading up to it. Alaska Airlines does.
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Unilever Buys Dollar Shave Club To Become Digital Direct

Unilever is the latest in a long string of enterprise giants to acquire digital. It acquired the digital-native startup, Dollar Shave Club, for $1 billion. I've been telling the Dollar Shave story lately as a way to describe the disruption possible when a company uses digital technology to establish a direct relationship with a customer. Dollar Shave Club is in its customers' daily shower and conscienciousness. It's a digital disruptor, not because it has a revolutionary product. It's because it has a revolutionary relationship.

What should you take away from this Dollar Shave Club deal?

  • Digital disruption starts with a direct customer relationship. Sure, sometimes digital is about new products and services. But it's always about a direct relationship with customers. That's what's so scary to traditional industries with their indirect distribution models. Unilever has sold through distribution for time and memorial. It doesn't know its customers except through the lens of research and somes times purchased sales data. No longer. Now it can know its customers as Under Armour is starting to.
  • Digital strategy is about bridging the gap between your core capabilities and what customers want. For large firms, you don't need to reinvent your core capabilities to become digital. You instead need to recognize that digital is the way customers want to buy, engage, and get service, so you must give them the tools they expect. Dollar Shave Club sells razors. It just sells them conveniently at a great price. That puts digital within reach of every company.

There will be a lot more digital direct deals like this. Direct customer relationships are one vector of our digital future.

Responsive Web Design Is Not Mobile First

My colleague and coauthor Julie Ask and I are watching with dismay as company after company shrinks its desktop website down to a small screen using responsive web design (RWD) techniques so it fits on – but isn’t optimized for – smartphones.

Companies have delightedly embraced responsive web design as the one-size-fits-all solution to mobile, tablet, and desktop sites. In a recent survey of digital business professionals, we found that 93% are using, piloting, or planning to pilot responsive web design.

That sounds great on paper. After all, RWD is a very practical approach to developing websites that render on any device. But when mobile tasks diverge from desktop tasks as they often do in commerce, the one-size-fits-all approach taken by most responsive retrofits will fail to delight or even satisfy customers on smartphones or desktops.

People do different things on their smartphones than on their desktops or tablets (see figure). To delight and serve your customers in their mobile moments of need, you need to give them exactly what they need to move forward in their immediate context. So if you can't reach all customers with an app – AND YOU WON’T! – you will need to deliver an app-like mobile web experience.

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What Comes After The Unicorn Carnage?

According to CB Insights (thanks, guys!), by the end of 2015, investors had given 152 tech startups “unicorn” valuations of more than $1 billion.  But now, valuations are deflating for many private and public tech companies. Is this 2000 all over again? No. The bubble popping over the next two years will mean job loss in Silicon Valley and a pullback in disruptor investment but not a collapse of tech spending or of the wider economy. CIOs and CMOs should seize this small window of opportunity to hire or acquire talent for digital transformation to serve customers in the digital channels of their choice.
 
That’s our conclusion (24 analysts contributed to this analysis, with special thanks to Chris Mines and James McQuivey) in new Forrester reports for CIOs and for CMOs. We present the full analysis there, but here's a (long) summary.
 
 
1. The Unfolding Carnage Of Unicorns -- There’s Blood In The Water
 
Private investors dramatically drove up the number of unicorns -- private tech companies they valued at more than $1 billion -- from 31 in 2012 to 152 in 2016. But down rounds and post-IPO stock collapses have begun. Accel Partners’ Jim Breyer, believes 90% of unicorns will be repriced by investors or die. He called it “blood in the water.”
 
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After The Unicorn Carnage, Does Digital Disruption Take A Holiday?

We are seeing significant devaluation for startups and maturing unicorns (startups that soared above $1B in valuation). Valuation deflation was not just inevitable; the correction was overdue.

Evidently, not everybody needs a shiny new GoPro. Not every brand is ready to advertise on Snapchat. Not every regulator is ready to give Uber or Zenify a free ride. Not every company is ready to move its file system to Box.

Consumers and businesses do not have insatiable appetites for everything. That slice of reality was left out of entrepreneurs’ pitch decks and investors’ funding decisions. In a classic herd mentality driven by the fear of missing out, venture capitalists, private equity investors, even mature money managers funded 152 digital startups at valuations more than $1 billion (according to CB Insights as of February 16, 2016). That’s up from 39 unicorns in November 2013. Do the math: There are almost four times as many billion-dollar startups today than two years ago.

The desire to replicate the results of the best companies drove these giddy investments. But when investors start valuing startups based on the best imaginable metrics -- Facebook-quality price-earnings ratios, smartphone-level adoption of every new gadget, or Salesforce or Amazon levels of SaaS valuations -- the valuations en masse soar beyond credibility.

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Does More Spam Marketing Mean Slower Growth Ahead?

Febuary 16, 2016

I don't know about you, but I'm getting way too many unwelcome solicitations from LinkedIn. I love this website when I need to look up someone I'm meeting on the phone. But I don't pay for it despite LinkedIn's repeated pitches on premium this and high-value that. Doubt I ever would. After all, I can just ask the person and usually do.

But LinkedIn's solicitations have begun to reach fever pitch, roughly one every other day coming into my inbox. And then I realized in the last three months, LinkedIn's stock has dropped 59% down to $103 today from $254 in November. The headlines stress slowing growth.

A lightbulb went off.  Does marketing get its spam marching orders when the CEO is anxious about growth? Is that how it works? Does more spam mean slower growth?

I started thinking about other frenetic pitches I've been getting lately. AT&T, Verizon, Flipboard, Strava, even Facebook have been loading up my inbox with screed I didn't ask for and don't need. Are their growth plans suspect, too?

Can't say this is analysis, but it's a hypothesis worth researching.

Thank You, Steve Mills. I'll Take Your Second Call.

Steve Mills is the most important software executive you never heard of. He's so important that I've sometimes wondered whether I should write a book about him. Steve Mills retired in December 2015 as the executive vice president of IBM Software & Systems after 43 years. He invented IBM Software. You can read Fortune's story here.

In 1995, Steve saw something important: Software was becoming more important than hardware. He convinced Lou Gerstner, CEO of IBM, to launch a Software business. That might sound obvious now, but at the time it was radical. Hardware companies had tons of software (still do). But they didn't sell software; they gave it away to sell hardware.

Steve's the guy that convinced a business machines company it could still dance even as software was eating the world. To do it had to wrestle lots of code and control away from the hardware and independent businesses and get it marching in lockstep. He was the right guy for the job.

Steve was also a unique personality. He was as Big Blue as any IBMer I've ever met, and he fiercely protected IBM's interests. But he did it using software. Here are some Steve-isms that shine light on the things he believed in most about software:

  1. Software is a high-growth, high-margin business. That's why Steve left his cozy sales job to convince the firm that Software should be its own busniness. When I first met him in 1998, he astounded me by marching a room of hard-boiled industry analysts through a three-hour tour de force of his entire software portfolio. He knew all the facts, numbers, and code releases. I think even his leadership team sat in awe. It was impressive, especially for the only history major in a room full of engineers.
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I'm Shocked, Shocked That GoPro Missed Its Number

GoPro's stock, the gadget darling IPO of 2014, laid off 7% of its workforce and took a big hit in the stock market when it announced it had missed its revenue projection.

All I have to say about that is, "duh."

How big did you think they would get last year? GoPro is now in the very tough early majority phase of adoption, where fewer people in that cohort are interested in the product.

And you can't forecast early majority adoption based on early adopter purchases. Early adopters are a breed apart. They love tech. They take more risks. They try things out and abandon them with ease. Early majority customers are none of those things. And mainstream customers are even less so. 

If you want to play armchair prognosticor about a new technology (Apple Watch, anyone?), start with 15 points and take away points by asking four questions:

  1. If you own a GoPro, when was the last time you used it? If it wasn't in the last month, then take away a point. If it wasn't in the last year, then two points. If you don't own one and don't plan to, then take away three points.
  2. Could you imagine your neighbor using a GoPro? If not, then take away two points.
  3. Could you imagine a lot of people at the airport, truck stop, Starbucks, and Disneyworld using a GoPro? Take a point away for each venue where most people won't.
  4. Would your mother, father, and baby brother or child want to use a GoPro? Take away one point for each that won't.
  5. Could you imagine a lotta lotta people in China or India or Brazil using a GoPro? If not, then take away three points.
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