TechSavvy: Not All Digital Threats Are Disruptions

MIT Sloan Management Review, July 28, 2016

by Theodore Kinni

Thanks to Clayton Christensen, we throw the word “disruption” around pretty freely these days. But Strategy& consultant Alexander Kandybin reminds us that many of the competitive challenges that we call disruptions don’t actually fit Christensen’s definition of the term: “An innovation that is disruptive allows a whole new population of consumers at the bottom of a market access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill.”

In an article in strategy+business, Kandybin warns executives that misidentifying major competitive challenges — like new products, technologies, and business models — as disruptions can lead to flawed strategic responses. Instead, he counsels them to learn to recognize different kinds of market dislocations (“radical breakaways from the existing market that occur when a company introduces a business model or a product that sits apart from those of competitors”), the directions from which they can come, and the best responses for each.

Kandybin’s approach offers more nuanced strategic responses to digital competitive threats. “Two of them, matching the threat and absorbing the threat, can be effective when incumbents are facing new entrants coming from any direction (from the top, side, or bottom),” writes the consultant. “A third, leapfrogging the threat, is most effective in dealing with dislocation from the top and from the side. And finally, the strategy of ignoring the innovation is most commonly associated with disruption from the bottom.

“Each strategy has risks, especially when it is used at the wrong moment or against the wrong threat,” Kandybin adds. “But when you understand where the threat is coming from and how it is changing your market, you can choose a strategic response that is likely to sustain your business.” Read the rest here

Catalyst or threat? The strategic implications of PSD2 for Europe’s banks

Learned a lot lending an editorial hand here: 

PwC Strategy&, July 25, 2016

The adoption of the revised Directive on Payment Services (PSD2) has set the stage for open banking in Europe. By providing standardized access to customer data and banking infrastructure, PSD2 will lower the barriers for entry to third-party providers and financial technology companies (FinTechs), and it will stimulate the development of new business models and a wide range of new banking services. In this way, PSD2 will be a catalyst for both disruption and strategic renewal in Europe’s banking markets.

Europe’s consumers have started to embrace the kinds of services and companies that PSD2 will foster. A PwC Strategy& study on PSD2, conducted in the first quarter of 2016, suggests that 88 percent of consumers use third-party providers for online payments, which indicates that there is a large, primed base of customers for other digital banking services.

Nevertheless, the overall response of Europe’s bankers to PSD2 is one of uncertainty: Although 68 percent of bankers fear that PSD2 will cause them to lose control of the client interface, many of them remain unsure how to respond to the new directive. As a result, they are adopting a defensive, wait-and-see stance that is risk averse.

In contrast, there are a few banks — and more third-party providers and FinTechs — that are embracing the possibilities of open banking and pursuing strategies aimed at winning a leading role in the future. They are not waiting until the implementation of PSD2.

In this report, we bring together the attitudes and behaviors of banking customers, the mind-set and concerns of bankers, and the responses of first-mover banks and FinTechs to analyze the implications and ramifications of PSD2 for Europe’s banks. And we offer five strategic options that banks can consider to expand their offerings, better serve their customers, and grow their market share and revenues.

With the adoption of PSD2, an irrevocable shift to open banking in Europe has become inevitable. Europe’s banks cannot afford to wait for the official PSD2 implementation date in 2018 to formulate a strategic response. Download the full paper here

TechSavvy: The $105 Billion Enterprise Market for Pokémon Go

MIT Sloan Management Review, July 21, 2017

by Theodore Kinni
Suddenly, Pokémon Go, the app based on the 20-year-old video game, is everywhere. People with smartphones are more like zombies than ever. Marketers are formulating their Pokémon Go strategies. Thanks, augmented reality!

The consumer market is not the only place AR is taking off, according to Bhavesh Kumar of VMWare AirWatch. “There’s increasingly reason to believe that AR could take off for businesses long before it goes mainstream with consumers,” he declared in a blog post that appeared one day before Pokémon Go, well, went mainstream with consumers.

But that doesn’t mean Kumar is wrong. He’s right in saying that the AR device ecosystem is more developed for the enterprise market than for the consumer market, and that the industry standards needed to put AR to work are already emerging.

Moreover, Kumar is backed up by a new study from Index AR Solutions, a developer of customized AR business solutions for the corporate market that is collaborating with Newport News Shipbuilding. Index AR forecasts that the enterprise market for AR will hit $105 billion within 15 years, including $49 billion in hardware, $11 billion in software, and $45 billion in services. Assuming, of course, that we can tear ourselves away from Pokémon Go. Read the rest here.

Steve Blank’s Required Reading

strategy+business, July 20, 2016

by Theodore Kinni 

From black ops to lean startups, it seems there has never been a dull period in Steve Blank’s career — except, perhaps, the one semester Blank spent at the University of Michigan before dropping out and enlisting in the U.S. Air Force, where he did a stint repairing avionics in Thailand during the Vietnam War.

Blank landed in Silicon Valley in 1978, where he did classified intelligence work for ESL, a government contractor in national reconnaissance. He quickly internalized the entrepreneurial ethic of the valley. By the time he retired two decades later, he had been involved with eight startups, including software company E.piphany, which he cofounded in his living room.

Like an increasing number of baby boomers, Blank didn’t actually retire. He invested in and advised new startups. He wrote a book about building early-stage companies, The Four Steps to the Epiphany: Successful Strategies for Products That Win (K&S Ranch Press, 2003), which is now in its fifth edition. It details Blank’s “customer development process,” a parallel process to product development aimed at ensuring that startups discover viable markets, locate their first customers, validate their product assumptions in their targeted markets, and adapt their products when necessary. And he began teaching classes in entrepreneurship at the University of California at Berkeley and Stanford University.

These strings all came together when Blank invested in a company cofounded by Eric Ries, who read his book and took his class. Ries incorporated and popularized Blank’s thinking as a cornerstone in the lean startup movement. Blank, to his own surprise, became something of a guru. He wrote a second book, with Bob Dorf, The Startup Owner’s Manual: The Step-by-Step Guide for Building a Great Company (K&S Ranch Press, 2012), and a third, a collection of his articles titled Holding a Cat by the Tail: Lessons from an Entrepreneurial Life (K&S Ranch Press, 2014). Read the rest here

TechSavvy: Better Management Through A/B Testing

MIT Sloan Management Review, July 14, 2016

by Theodore Kinni

Marketers and product developers love A/B testing. Want to figure out the most compelling offer for an online ad or the best design for new app? Test two of alternatives head to head and see which one people like better. Voilà!

A/B testing works so well that Instacart's vice president of product, Elliot Shmukler thinks managers should adopt it to improve their decision-making prowess, too. “There are many effective decision-making frameworks out there, but I wanted to use one that would simultaneously surface the best choice for the product while still encouraging the inherently different approaches to ideation among my product managers,” he explains.

When Shmukler’s product teams can’t resolve conflicting ideas and come to him for a final decision, he refuses to issue an edict. “Instead of giving a verdict, [I] test both theories and let data be the judge,” he says. “At first pass, this method may seem to favor the data-driven people, but it empowers each PM to push ideas forward. They learn independently rather than feeling that a decision was made for them.”

A/B testing also allows Shmukler to approve multiple product ideas, with the proviso that they be tested. “It increases experimentation, autonomy and learning throughout the organization,” he says. “Most critically, it fosters goodwill among smart — but very different — PMs who want to try out their ideas.”

For more on the benefits — and the challenges — of using A/B testing for management decisions, read Shmuckler’s interview in First Round Review. Read the rest here

TechSavvy: Does Social Media Enhance Employee Productivity?

MIT Sloan Management Review, July 7, 2016

by Theodore Kinni


Do you know what your employees are doing online? Come next May, Singaporean prime minister Lee Hsien Loong won’t have any trouble answering that question. That’s when 100,000 computers used by the city-state’s civil servants will be disconnected from the Internet. The government is taking this drastic action to “tighten security,” writes tech editor Irene Tham in The Straits Times.

Being of a cynical bent, I think that eliminating employee access to Facebook and Twitter and other social media platforms might give Singapore’s government a nice bump in productivity, too. But I might be wrong, according to a report from the Pew Research Center that delves into the use of social media in the workplace.

“Today’s workers incorporate social media into a wide range of activities while on the job,” explain Pew Center researcher Kenneth Olmstead and University of Michigan School of Information professors Cliff Lampe and Nicole Ellison. “Some of these activities are explicitly professional or job-related, while others are more personal in nature.”

Sure, their survey says — ding! — that the number one reason why American workers use social media at work (34% of respondents) is “to take a mental break from their job.” Moreover, reason number two (27% of respondents) is to “connect with friends and family while at work.” But then comes a list that might make your inner CEO perk up a bit: 24% of the respondents use social media at work to foster professional connections; 20% to help them solve work problems; 17% to foster relationships with co-workers and/or learn more about them; and 12% to ask work-related questions of people outside their organization and/or inside their organization.

So, maybe your company shouldn’t follow Singapore’s lead. Anyway, aren’t all those civil servants simply gonna go all Hillary Clinton with their personal devices? Read the rest here

Fit for Service government: The opportunity in the GCC’s fiscal challenge

Learned a lot lending an editorial hand on this white paper

PWC Strategy&, July 5, 2016

The Gulf Cooperation Council (GCC) countries are in a fiscal crunch. Even if the GCC member states can grow non-oil revenues by 10 percent annually over the rest of this decade and the average price per barrel of oil returns to US$50, their budgets will still need to be reduced by approximately $100 billion (7 percent of GCC GDP) on an annual basis to achieve fiscal balance.

All GCC governments have announced spending cuts, but conventional strategies, such as across-the-board or narrowly focused cuts, could do irreparable harm to their economic and social development. Instead, they need a more effective approach — one that enables them to cut costs and grow stronger simultaneously. This approach, which Strategy& developed for the private sector and customized for government, is called Fit for Service.

Fit for Service achieves substantial and sustainable reductions in spending, while bolstering investment in the government services and initiatives that are essential to the long-term security and well-being of governments’ constituents. It involves four actions: articulating strategy; transforming the existing cost structure of government services; building the necessary capabilities; and reorganizing the government’s operating model for high performance. There are two enablers of these actions. The first is digital, which drives the digital transformation of government. The second is the development of the talent needed within government and the national economy at large along with the creation of a change-friendly culture that can support and nurture stakeholders as they undertake transformational initiatives.

Fit for Service initiatives are difficult but worth the effort because the leaders of the GCC member states cannot simply cut costs by conventional means if they are to transform the cost base of their governments and create a more sustainable fiscal future. Download the full paper here.

ElBulli and the Limits of Corporate Innovation

strategy+business, July 6, 2016

by Theodore Kinni

In 2010, elBulli was named the second-best restaurant in the world. In 2011, superstar chef and co-owner Ferran Adrià shuttered the small restaurant in a small town on Spain’s Mediterranean coast, marking the end of a remarkable, three-decade run of culinary success. By that time, Adrià and his staff were receiving 2 million requests for reservations annually — from people who were willing to travel to the northeastern corner of Spain to eat the 8,000 meals conjured up during the six months the restaurant was open each year. Moreover, 3,000 or so of the world’s most talented culinary pros were applying for elBulli’s 30 unpaid internships.

What accounted for this unprecedented level of demand from foodies and the people who feed them? In Appetite for Innovation: Creativity and Change at elBulli (Columbia University Press, 2016), M. Pilar Opazo, a post-doctoral research scholar at Columbia Business School, says that it was the “search for radical innovation and endless reinvention.”

Adrià, of course, plays a leading role in the book. A culinary autodidact who started as a dishwasher, he began working at elBulli, a one-star Michelin restaurant serving French nouvelle cuisine, as a temporary intern in 1983. By 1990, when elBulli, then serving a locally inspired Mediterranean menu, earned its second Michelin star, he was its co-owner.

“We could have kept doing the Mediterranean style forever.… But we didn’t. I don’t really know why,” Adrià tells Opazo. Then, after a pause, “Well…we got bored. That’s why.” Read the rest here