Enterprise 3.0: new representations of new markets : summary
Below is a brief recap of our latest Diamond Exchange, Enterprise 3.0: New Representations of New Markets, which summarizes some of the highlights and the "to-dos" for leaders that emerged from our discussion. The core message was that technology is enabling new ways to interact with customers, new social communities, new ways to manage organizations, new identities, and new prediction tools. In short, customers are no longer "customers" but rather members of an extended dialog which should begin long before the sale and last long after.
Ray Kurzweil, renowned inventor and futurist, kicked off the event and showed how market after market, product after product, process after process is becoming "informationalized" - that is, modeled in information and processed on digital tools. He showed that as something becomes informationalized it is possible to improve the price performance of that product or service at an exponential rate - he calls this the Law of Accelerating Returns . So when we look at the cost of keeping customer information or sequencing the human genome - both are decreasing very, very rapidly. His book, The Singularity is Near, details this breathtaking point of view!
The leadership challenge presented by Ray's thinking is two-fold: first, almost all forecasting processes in firms assume linear improvement. However, if parts of your business, like the cost of contacting targets, the cost of customer service, or even the cost of energy, may be improving at an exponential rate, linear forecasts will be useless and lead you astray. Great companies realize this disconnect between linear thinking and exponential reality, and use it to their advantage in planning. For example, two decades ago, Progressive Insurance saw that micro-segmentation was going to be exponentially cheaper and they built a great business on understanding the less expensive tools to target customers with radically superior precision, contact them efficiently, and analyze vast quantities of relevant data to shape price and offers. Today, health insurers are just beginning this analytically intensive journey, to name just one example. Every firm should perform the exercise of understanding what tasks and capabilities are moving at exponential speed, and which are still improving at a linear pace. The second leadership challenge is to figure out how to shake up your organization and make sure that it is paying attention to the world of possibilities, before the competition uses new emerging capabilities to swamp you.
After Ray Kurzweil, we had a presentation by Vice Admiral Brian Peterman, Commander Atlantic Area and Defense Force East of the United States Coast Guard, who discussed the challenges the Coast Guard faces when implementing new technologies across its vast set of missions-from interdicting drug shipments to protecting the marine environment. He reminded us all of the organizational and political roadblocks that some managers face when trying to take advantage of the possibilities of new technologies and other innovations.
In our second day, I began with an argument that all businesses need to think about their customers as members. I noted how the World Wide Web is no longer tethered to the desktop, but is now on the phone and in the car, and soon to be everywhere as the size and quality of the "screen-estate" in every home, office, and public space is growing rapidly. The web will be everywhere. In this web, customers self-organize and rate every product and service-from bracelets to doctors-and we will see increased use of lists and rating systems to help customers find their way in this complex environment. All firms should be part of this discussion about their products and services and need to engage these vast communities of interest to find out what they want in terms of service, new products, and new needs. If you don't do it, someone will do it to you.
We then launched into a fascinating pair of examples of fresh, vibrant, new methods to engage and host customers: Second Life and My Virtual Model. Many of you may have been watching the progression of Second Life-the fully 3-D virtual world, which now has 9.5 million resident accounts, and over 1.5 million people who used it in the past sixty days-and is growing rapidly. The average age of these "residents" is 32, and 43 percent are female. One of the most interesting examples was when Mark Lentczner, a director at Linden Lab, makers of Second Life, showed how a bank tested three different lobby designs in Second Life and let the residents give feedback on their preferred design for the bank of the future.
Louise Guay, founder of My Virtual Model, demonstrated how consumers create avatars in their own image and virtual wardrobes, appliances, and even parts of their entire home to help them visualize online purchases. By observing consumer choices, major companies from Adidas to Sears are using these new virtual environments to radically lower the cost and risk of launching new products while speeding up how quickly they can get a new product to market. What may be the most captivating part of this technology is that they are designing it so that soon you will be able to take your avatar to many different companies' web sites and even into Second Life. This means that as more and more retailers build an interface to support these avatars, consumers can "visually search" for new things. Instead of shopping by saying "red blouse" and then looking through the search results, the shopper can design their desired red blouse and then use that digital representation of their desire to find other red blouses exactly like the one the customer "made". This new mode to explore the web looks and feels completely different than using Google's or Amazon's search engines. Again, these two technologies help companies make customers into members, while lowering risk of innovation, and speeding time to market.
Late on Monday, we heard from John Henry Clippinger, author of A Crowd of One and senior fellow at the Berkman Institute at Harvard Law School. John's passion has been to create a new mode of user controlled identity. He argued that we are naturally social and trusting beings, right down to the fact that we have mirror neurons which help us feel empathy when we engage in social activities, including online networks. By allowing users to have more control over their identities, companies can build affinity and trust with their members. Further, John told about the Higgins project, which is a robust, open source implementation of the user-centric identity framework which has been backed by IBM's Eclipse foundation, and other open source groups. It can be worked into your firm's approach to identity management today!
On Tuesday, Chris Curran, my partner at Diamond and our CTO, gave the highlights of our new Digital IQ Survey, which had over 450 responses from 20 industries. We found that over 80% of all companies think that information technology (IT) is strategic to their business but only 30% of CEOs are seen as active champions of the technology. Moreover, we have found that the CIO only is involved in strategic planning about a third of the time, and most disturbingly, there is a consistent under-commitment to management capabilities and practices which can turn wishes into real business value. As Chris so poignantly put it, "In short, our survey is like seeing a smoking doctor-firms see the strategic importance of IT, but like the smoking doctor, their actions don't match what they want and know." Given the Law of Accelerating Returns, all businesses need to make sure their competitors are not on a curve of exponential improvement enabled by IT while they toddle along at a linear pace!
Our last panel, hosted by Chunka Mui, combined two speakers who both used technology to help predict the future: Laura Peterson, CEO of Ventana Systems, and Emile Servan-Schreiber, CEO & Founder of Newsfutures. Laura presented some fascinating data on how Ventana's complex modeling approach allowed for organizations as diverse as the federal weapons labs, to Morgan Stanley's real estate investment division, have benefitted by using complex systems-dynamics models to simulate the future and reliably predict it. Emile showed intriguing new examples of prediction markets, used on events like whether or not Boeing will deliver their Dreamliner on time, to what is the volume of gasoline that will be consumed in Texas next month. Emile and others have found that by creating a market in future events, the wisdom of the crowd emerges, and the prediction is much more accurate than a traditional forecast. For example, in the Iowa Electronic Market, people can "buy" and "sell"-with real money-whether or not Hillary Clinton will win the presidential election. If the stock that represents "Hillary will win" is more highly priced than "Fred Thompson will win," that "prediction" has proven more reliable than any poll. Emile's company allows firms to do this with any discrete decision and unlock that market wisdom. Given how quickly technology is moving, improving the ability to predict is vital to lowering risk, and increasing organizational agility.
Overall it was an exciting three days filled with everything from the mind-expanding challenges of Kurzweil and Second Life, to the practical advice of the Digital IQ survey. After our experience together, I believe more than ever that transforming your "customers" into "members" opens your organization to new ways for value to increase and deepen loyalty. You can open up new modes of engagement including co-design of products and services, active member feedback, and easier methods for members to refer you to other potential members. We know from many studies that referrals are the litmus test of any commercial relationship. In short, if your members recruit other members, you are winning in the marketplace, but if you settle for satisfied customers, you are still very vulnerable.
In order to achieve membership status with your customers, you have to be ready to stomach a true two-way dialog with members, and make your technological platform robust enough to handle the increased number of customer interactions and flow of data. You also need to create skills to digest the data into useful information to inform rapid action. And remember, transforming customers into members requires a mental shift throughout the organization, which is perhaps the biggest leadership challenge of all.
All the best,
John Sviokla
Vice Chairman, Diamond Management and Technology Consultants, Inc.
Executive Director, Diamond Exchange
