February 11, 2020 Interconnected Information Transforms Business Opportunities

The combination of interconnectedness, ubiquity, always on and mobility is transforming business in ways we’ve never seen before.

By William Putsis, PhD

The combination of interconnectedness, ubiquity, always on and mobility has brought multiple devices, forms of production, platforms and huge data/analytical capabilities together to fundamentally transform business in ways we’ve never seen before and probably never will see again in our lifetimes.

Google was once “just” a search engine. Now it’s poised to be dominant in internet advertising, mobile phones, television, internet provision and maps, for example. Indeed, we no longer exclusively rent hotel rooms through the usual hotel brands but rent rooms or private apartments from Airbnb. We no longer hail taxis but rent rides from companies such as Uber or Lyft and we increasingly rent cars as we need them, by the hour, through companies like Zipcar. Olli, an offering by Local Motors, will even pick you up (like Uber) in a driverless bus powered by IBM’s Watson — and the list goes on.

But there’s often a fine line between success and failure. Consider that:

• More than 17,000 “YouTubes” existed before YouTube.
• Eighteen web search services came on the scene before Google — some quite similar to Google.
• Net2Phone launched the year before Skype; however, Skype succeeded.
• Friendster (and many others) came before Facebook.

So, what’s so different about today? And why do some succeed while others fail?

An illustration of what’s new about today

Imagine being a manufacturer of “white goods,” such as washing machines, dryers and refrigerators. For most of your career, you’ve competed on a combination of cost, distribution, sales and features — the latter ranging from the “beautiful” avocado colors of the 1970s to more recent stainless steel finishes. You may segment your market and have a range of offerings, lines and prices to match differing budgets and segments. Indeed, your entire career may have been spent competing in the value chain, working the production system to gain advantage on the cost side and working the sales teams to compete in a consolidating retail environment. All your efforts have been in an attempt to squeeze margin inside of an intensely competitive industry.

Back in the early 2000s, white goods manufacturers were salivating over the prospect of charging huge margins on internet-enabled refrigerators and other appliances that would be connected to the internet. This connection could, for example, enable users to control the devices while away from home — including ordering food items to complete recipes. Manufacturers saw a potential to extract huge margins for these new internet-enabled appliances. However, they ran into a couple of major obstacles. First, customers didn’t flock to them when they were introduced. There simply wasn’t enough benefit. Smartphones didn’t have a huge penetration yet, so connecting to the appliances remotely was difficult. Besides, what exactly would you do with your refrigerator when away from home anyway? Second, once smartphones and tablets began to pervade the market, any functionality offered by your internet-enabled fridge could be replicated — with a great deal of additional functionality and mobility. So, why in the world would anyone need an internet-enabled refrigerator?

Fast forward to 2020.

Imagine a world where the objects around us talk to each other. The baby is crying? Soothing music plays in response. A storm is coming or the ground is sufficiently moist? The irrigation system automatically shuts off. Your coffeemaker coordinates with your clock to turn on five minutes before your alarm goes off — or your local Starbucks senses your approach and begins preparing your usual order. The tag on your dog’s collar sends you a text message in the event that Fido leaves the yard. Your basketball court automatically tracks your shot percentage. Well, maybe not all of this is such a good idea!

This isn’t the plot from some futuristic movie, but a reality that is feasible today and it’s just a matter of time before it becomes commonplace. Indeed, each individual part has generally been feasible for some time. But it’s the interconnected and ubiquitous nature of the information that has transformed the merely feasible into business opportunities and modern-day realities.

Think ecosystems not platforms — and platforms not products

Returning to the white goods example, imagine a smart refrigerator that can determine the expiration date on a carton of milk in your fridge, or cross-reference its contents with what’s available in your pantry to confirm your choice of recipe on a Friday night. Via connection through your smartphone or tablet, the refrigerator could automatically order and have delivered to your door a new carton of milk to replace the expired one. Are you interested now in the premium that the manufacturer will charge? Indeed, there’s a host of evidence from Wi-Fi-enabled DVD players to televisions that suggests that consumers are willing to pay more for devices when they’re internet-enabled. This means there may be opportunities for companies that can interconnect it all seamlessly — in and out of the home.

Today, the key to success is multidimensional, and involves:

1. Ease of use. A key is simplicity. Any lack of ease of use creates a barrier to adoption. Consumers will often trade off added benefits for ease of use. Illustrations are numerous: SimpliSafe or Canary home alarms, Nest thermostats, etc. The use of artificial intelligence to learn from your previous behavior can make devices easier and easier to use the more that we use them.

2. Salient benefit. The benefit offered needs to be clear and obvious, and easily seen by the customer.

3. Connectivity and automation. Stand-alone products are now becoming replaced by connected products since the benefit grows exponentially as products are connected and automatic. For example, when you pull your car out of the garage, the lights in your home turn off, heat or cooling adjusts, your alarm and motion sensors automatically turn on and your doors automatically lock.

4. Seamlessness. Protocols need to communicate and inter-operate for maximum benefit.

As we devise offerings that do the above, we move from the equivalent of “internet-enabled” refrigerators that offer little practical benefit to ones that provide seamless, automatic and easy-to-see benefits.

Dr. William Putsis

Dr. William Putsis is a Professor of Marketing, Economics and Business Strategy at the University of North Carolina-Chapel Hill, and a Faculty Fellow for Executive Programs at Yale University. He is also president and CEO of Chestnut Hill Associates, a strategy consulting firm, and founder of the software company, CADEO Economics, which automates his data modeling-based strategy development processes. His new book is The Carrot and the Stick: Leveraging Strategic Control for Growth (Rotman-UTP Publishing, Feb. 3, 2020). Learn more at www.putsis.com or www.chestnuthillconsulting.com.

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