Welcome!

Related Topics: @BigDataExpo, @CloudExpo, @ThingsExpo

@BigDataExpo: Blog Feed Post

Business Model Transformation | @CloudExpo #BigData #DigitalTransformation

Across a number of industries, we are seeing business models under attack

Business Model Transformation and What it Means to the Data Industry

I recently read an MIT Sloan Management Review article by Clayton Christensen’s recent book titled “The Hard Truth About Business Model Innovations.” While the article is full of great observations about business model transformation, the most important motivation for business model transformation is found at the end:

“..our understanding of the business model journey allows us to see that, over the long term, the greatest innovation risk a company can take is to decide not to create new businesses that decouple the company’s future from that of its current business units.”

We use the Big Data Business Model Maturity Index as a vehicle for engaging with our clients about how they can leverage data and analytics to transform their business models (see Figure 1).

Figure 1: Big Data Business Model Maturity Index

In light of the Big Data Business Model Maturity Index, the article really got me thinking about how the entire data technology industry is posed for a business model transformation.  Let me explain.

Across a number of industries, we are seeing business models under attack.  It may have started with the digital media industries (advertising, entertainment) but it has quickly spread into physical product and service industries such as retail, telecommunications, financial services, healthcare, education, travel, hospitality, transportation, distribution and manufacturing.  Organizations within these industries are leveraging data and analytics to disrupt existing business models (and disintermediate customer relationships) as the boundaries that separate industries evaporate (see Figure 2).

Figure 2: Big Data Driving Business Model Disruption

I believe that same business model disruption (and subsequent customer disintermediation) is going to happen to the technology industry that spawned all of this transformation, and no technology industry has the opportunity to be a business model disrupter more than the data technology industry – the industry that gathers, stores, secures, provisions and analyzes the growing wealth of transactional, social, mobile, wearables, embedded, machine generated and publicly available data.

So I searched for a proxy that might provide some insights into the business model transformation of the data industry, which took me to the bottled water industry transformation.

Bottled Water Business Model Transformation
For over three decades, water was simply something that came out of the tap in your home or the water fountain.  While water was essential to life, its relative financial value was very modest. Then things changed.

In 1977, Perrier launched a successful advertising campaign in the United States, launching the popularity for bottled water. Bottled water is currently the second largest beverage category by volume in the United States, behind carbonated soft drinks (CSDs). The Beverage Marketing Corporation (BMC) predicts that bottled water will surpass CSDs to become the number one beverage in America by early 2017[1] (see Figure 3).

Figure 3: Increasing Demand for Bottled Water (per Person consumption)

Despite having one of the best municipal tap water systems in the world, American consumers flocked to commercial bottled water for four key reasons[2]:

  • First, consumers have been bombarded with advertisements that claim that their tap water is unsafe, or that bottled water is safer, healthier, and more hip.
  • Second, public drinking water fountains have become increasingly hard to find. And the ones that exist are not being adequately maintained.
  • Third, people are increasingly fearful of our tap water, hearing stories about contamination, new chemicals that our treatment systems aren’t designed to remove, or occasional failures of infrastructure that isn’t being adequately maintained (see Flint, MI water disaster).
  • Fourth, some people don’t like the taste of their tap water, or think they don’t.

A couple of key lessons that we can take away from the bottled water business model transformation:

  • Through a business model transformation effort focused on value and not just functionality, consumers willingly pay 2000x more for bottled water than they do for basically the same functionality coming out of the tap or water fountain.
  • The vendor didn’t create a new product – it changed the economic value of their product (water), through effective marketing, which spawned an industry.

Future of the Data Industry
The same phenomenon is starting to occur in the data technology industry, and the potential to change the financial valuation of data technology players could be stunning!  The challenge is how do these data technology vendors turn what has historically been a commodity by-product (data) into a premium product (business outcomes)?

Organizations have traditionally treated data as a legal or compliance requirement, supporting limited management reporting requirements.  Consequently organizations have treated data as a cost to be minimized.  The financial valuation of data technology companies has been based upon those perceptions and relationships. The below chart from Gartner summarizes the business model transformation challenge (see Figure 4):

Figure 4

Data technology companies tend to sell to the part of the organization where data is a cost to be minimized and the sales processes focuses on negotiating with Procurement on price, margin, terms and conditions, instead of engaging with the part of the organization where data is a corporate asset to be exploited for business value, and discussions focus on time-to-value and de-risking projects.

It would seem that anything that the data technology companies could do to increase the perceived and actual value of data to its customers and the market could dramatically increase their financial valuation.  This includes leveraging data to deliver business outcomes such as:

  • Optimize key business processes,
  • Uncover new monetization or revenue opportunities,
  • Reduce security, regulatory and compliance risks,
  • Create a more compelling customer and partner engagement, and
  • Enable new business models

This would require a business transformation for technology companies in order to focus more on delivering business outcomes and less on selling technology piece parts with “some assembly required.”

Data Industry Call to Action
In much the same way that Perrier’s introduction of bottled water to the United States in 1977 led to the creation of a new industry, the data technology industry sits at a similar business transformation point.  But business model innovation and transformation will not be achieved with a “business as usual” approach.  As Clayton Christensen points out: “organizational interdependences developed to optimize existing business processes dooms the creation of a new business model within the existing business model.”  It will require these companies to think differently about how they structure their organization, how they go to market, how they build products and how they incent their customer engagement teams in order to create value for their customers.

There is much that we can learn from other organizations that have transformational business models.  Companies such as Netflix, Amazon, Uber and GE have created business models by focusing on the Customer Journey; by meeting customers “where they are and taking them where they need to be” and focusing on delivering business outcomes (or decisions in data science vernacular), not just technology piece parts.

But this needs to be done at scale; something a data technology company is uniquely qualified for, with the ability to create pre-engineered solutions and “collaborative value creation” platforms that couple hardware, software, and consulting to support the customer journey.

Data technology companies can be the pioneers in transforming their business models; however, they will not drive business model transformation by selling data as a commodity like tap water.  Instead, data technology companies can exploit product development, sales, marketing and consulting to focus on delivering customer business outcomes at scale; helping customers to leverage and monetize their data assets to optimize key business processes, reduce security and compliance risks, uncover new monetization opportunities and drive a more compelling customer engagement[3].

[1] https://en.wikipedia.org/wiki/Bottled_water

[2] http://scienceblogs.com/significantfigures/index.php/2013/04/25/bottled-water-sales-the-shocking-reality/

[3] Here is some background reading for more details on this topic:

Plus, I am currently working on a research paper with the University of San Francisco titled “Applying Economic Concepts To Big Data To Determine The Financial Value Of The Organization’s Data And Analytics, And Understanding The Ramifications On The Organizations’ Financial Statements And IT Operations And Business Strategies” where we will put forth a framework and supporting processes to help organizations to determine (estimate) the economic value from their data.

The post Business Model Transformation and What it Means to the Data Industry appeared first on InFocus Blog | Dell EMC Services.

More Stories By William Schmarzo

Bill Schmarzo, author of “Big Data: Understanding How Data Powers Big Business”, is responsible for setting the strategy and defining the Big Data service line offerings and capabilities for the EMC Global Services organization. As part of Bill’s CTO charter, he is responsible for working with organizations to help them identify where and how to start their big data journeys. He’s written several white papers, avid blogger and is a frequent speaker on the use of Big Data and advanced analytics to power organization’s key business initiatives. He also teaches the “Big Data MBA” at the University of San Francisco School of Management.

Bill has nearly three decades of experience in data warehousing, BI and analytics. Bill authored EMC’s Vision Workshop methodology that links an organization’s strategic business initiatives with their supporting data and analytic requirements, and co-authored with Ralph Kimball a series of articles on analytic applications. Bill has served on The Data Warehouse Institute’s faculty as the head of the analytic applications curriculum.

Previously, Bill was the Vice President of Advertiser Analytics at Yahoo and the Vice President of Analytic Applications at Business Objects.

Latest Stories
Internet of @ThingsExpo, taking place October 31 - November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 21st International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. @ThingsExpo Silicon Valley Call for Papers is now open.
Regardless of what business you’re in, it’s increasingly a software-driven business. Consumers’ rising expectations for connected digital and physical experiences are driving what some are calling the "Customer Experience Challenge.” In his session at @DevOpsSummit at 20th Cloud Expo, Marco Morales, Director of Global Solutions at CollabNet, will discuss how organizations are increasingly adopting a discipline of Value Stream Mapping to ensure that the software they are producing is poised to ...
SYS-CON Events announced today that delaPlex will exhibit at SYS-CON's @ThingsExpo, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. delaPlex pioneered Software Development as a Service (SDaaS), which provides scalable resources to build, test, and deploy software. It’s a fast and more reliable way to develop a new product or expand your in-house team.
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm. In his Day 3 Keynote at 20th Cloud Expo, Chris Brown, a Solutions Marketing Manager at Nutanix, will explore t...
When NSA's digital armory was leaked, it was only a matter of time before the code was morphed into a ransom seeking worm. This talk, designed for C-level attendees, demonstrates a Live Hack of a virtual environment to show the ease in which any average user can leverage these tools and infiltrate their network environment. This session will include an overview of the Shadbrokers NSA leak situation.
Interested in leveling up on your Cloud Foundry skills? Join IBM for Cloud Foundry Days on June 7 at Cloud Expo New York at the Javits Center in New York City. Cloud Foundry Days is a free half day educational conference and networking event. Come find out why Cloud Foundry is the industry's fastest-growing and most adopted cloud application platform.
In his opening keynote at 20th Cloud Expo, Michael Maximilien, Research Scientist, Architect, and Engineer at IBM, will motivate why realizing the full potential of the cloud and social data requires artificial intelligence. By mixing Cloud Foundry and the rich set of Watson services, IBM's Bluemix is the best cloud operating system for enterprises today, providing rapid development and deployment of applications that can take advantage of the rich catalog of Watson services to help drive insigh...
Automation is enabling enterprises to design, deploy, and manage more complex, hybrid cloud environments. Yet the people who manage these environments must be trained in and understanding these environments better than ever before. A new era of analytics and cognitive computing is adding intelligence, but also more complexity, to these cloud environments. How smart is your cloud? How smart should it be? In this power panel at 20th Cloud Expo, moderated by Conference Chair Roger Strukhoff, pane...
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm.
As enterprise cloud becomes the norm, businesses and government programs must address compounded regulatory compliance related to data privacy and information protection. The most recent, Controlled Unclassified Information and the EU’s GDPR have board level implications and companies still struggle with demonstrating due diligence. Developers and DevOps leaders, as part of the pre-planning process and the associated supply chain, could benefit from updating their code libraries and design by in...
The 21st International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held October 31 - November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Digital Transformation, Machine Learning and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding busin...
Existing Big Data solutions are mainly focused on the discovery and analysis of data. The solutions are scalable and highly available but tedious when swapping in and swapping out occurs in disarray and thrashing takes place. The resolution for thrashing through machine learning algorithms and support nomenclature is through simple techniques. Organizations that have been collecting large customer data are increasingly seeing the need to use the data for swapping in and out and thrashing occurs ...
SYS-CON Events announced today that DivvyCloud will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. DivvyCloud software enables organizations to achieve their cloud computing goals by simplifying and automating security, compliance and cost optimization of public and private cloud infrastructure. Using DivvyCloud, customers can leverage programmatic Bots to identify and remediate common cloud problems in rea...
Most DevOps journeys involve several phases of maturity. Research shows that the inflection point where organizations begin to see maximum value is when they implement tight integration deploying their code to their infrastructure. Success at this level is the last barrier to at-will deployment. Storage, for instance, is more capable than where we read and write data. In his session at @DevOpsSummit at 20th Cloud Expo, Josh Atwell, a Developer Advocate for NetApp, will discuss the role and value...
SYS-CON Events announced today that Tintri, Inc, a leading provider of enterprise cloud infrastructure, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Tintri offers an enterprise cloud platform built with public cloud-like web services and RESTful APIs. Organizations use Tintri all-flash storage with scale-out and automation as a foundation for their own clouds – to build agile development environments...