Continuing the analysis

Good day.

I’ll get straight in to this week’s topic, with the idea being that it is a continuation of what I started last week. This is the second instalment of a series designed to directly and practically help you with your own Digital Transformation. On to this issue.

To get the best out of this Issue, I recommend reading Part 1 first.

Last week we looked at a simple but effective framework tool, the PESTEL, that is designed to give you a broader look at the market around you and the issues that may or may not affect your business. This issue takes brief look at Michael Porter’s Value Chain model. I’ve talked about the value chain previously, and how it needs to be taken in to account when designing products and services, so I thought I’d develop exactly what it is here. Whole books have been written about the subject, but as the tool is fairly simple to use at its most basic level, it’s worth learning and using regularly.

Investopedia defines the Value Chain as:

A value chain is a business model that describes the full range of activities needed to create a product or service. For companies that produce goods, a value chain comprises the steps that involve bringing a product from conception to distribution, and everything in between—such as procuring raw materials, manufacturing functions, and marketing activities.

A company conducts a value-chain analysis by evaluating the detailed procedures involved in each step of its business. The purpose of value-chain analyses is to increase production efficiency so that a company may deliver maximum value for the least possible cost.

Essentially, Michael Porter’s Value Chain model allows you to break down your business into sections and attribute to each section their relative value and contribution to the end result, the value add of your products and services. As an example, someone who sells fruits and vegetables may have a fairly simple value chain where elements like logistics and marketing are the principle value creators of the business. A product like Apple iPhone, I think we can all see, is a very different proposition, with and extremely complex value chain.

The value chain is represented as a graphic where all the distinct parts contribute to the right-hand side, which is the profit. This graphic shows the most common representation of the value chain:

Denis Fadeev CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)

There are two distinct sections; Support Activities, Primary Activities that are in play in any business that generate value helping generate revenue, and hence margin.

Support Activities

Support Activities, as the name suggests, are all the activities in a business that are required to assist and make more efficient the primary activities of the business. Michael Porter broke them down in to four sub-sections:

Firm Infrastructure: Consisting of business elements such as Accounting, Finance, Legal, PR, General Management, Facilities Management, Security, etc.

Human Resources Management: All elements of hiring, firing, on-boarding, training, personal development, salaries, etc.

Technology Development: Includes Computer hardware and software, networking, IT support, etc.

Procurement: Buying goods and services for use in the day to day running of the business and additionally parts that make up the finished product being sold to the final client.

Primary Activities

Inbound Logistics: Inbound Logistics receives raw materials, stocks them and deals with inventory, aiding the operations activity to become more efficient.

Operations: Unlike the Support Activities that can be loosely defined as Operations, these are the operations required to transform the product or service from the raw materials to the finished product, often manufacturing etc.

Outbound Logistics: These are the activities that fulfil an order for the customer and usually include stock and warehousing, distribution, reseller networks, final mile delivery, etc.

Marketing and Sales: Marketing and Sales are there to get the customer to the sale stage in the pipeline. That includes segmentation, marketing, online influence and presence, advertising, pricing, etc.

Service: Service is the activities required to support and maintain the product or service after its initial sale in a way that enhances its long term value for the customer. That can be online help, repair, servicing, etc.

To best utilise the model at first, it’s important not to get too deep into dissecting the entire business, start with one important product or service and break that down. Repeat the process with others, by creating multiple value chains. From there you may be able to identify similarities and synergies between products and services. I’ll talk about what to do at this point in the future.

You should be careful to not think only of the pieces that you do well, in fact much of the value obtained by this analysis is derived from mixing the exercise with the SW parts of a SWOT analysis. To recap, SWOT is Strengths, Weaknesses, Opportunities and Threats.

Honestly looking at the strengths and weaknesses of your business and where they map to the value chain, either as Support Activities or Primary Activities, will be crucial in the next stages of determining your digital strategy going forward.

Here’s a quick representation of the above discussion I quickly put together using PowerPoint:

For further reading on the Value Chain, I’d suggest reading Competitive Advantage: Creating and Sustaining Superior Performance, Michael E. Porter, he additionally introduces his Competitive Forces Model, which is also useful to determine the viability of one market or another.

I’d be honoured to help you in your own Digital Transformation journey. Hit reply to this email if you would like to discuss further.

Reading List

CTU 30th anniversary: FutureScape to highlight achievements in Caribbean - CARICOM

Caribbean FutureScape, a technology immersion event, is the first ever being staged in the Caribbean, and will take place from 29th April to 1st May 2019, at the Hyatt Regency, Port of Spain, Trinidad and Tobago.

I’ll report back on what the main takeaways were from the event.

One Year In: How our $5B investment in IoT and intelligent edge is accelerating customer, partner and solution innovation - The Official Microsoft Blog

IoT and Intelligent Edge technology, I believe, is one of the most important parts of the Digital Transformation process. You need to measure, and measure what matters, to take better decisions based on analysis of data collected.

Caribbean voices rising in global Internet governance - SightLine

If you’re searching for the next wave of Internet development to come from the Caribbean, an international conference recently held in Bridgetown is a good place to start. Hosted by the American Registry for Internet Numbers (ARIN), it gathered Internet stakeholders from across the Caribbean and North America for high-level talks under the theme “Caribbean priorities for the global Internet,” from April 10 to 12. 

The Future is Digital Newsletter is intended to be shared as widely as you see fit, and I encourage you to forward it to people you feel may be interested in these matters, CEOs, Business Leaders, Influencers. Thank you.

Thanks for being a supporter. Best regards.

Let’s start with the basics

Good Morning everyone.

A big welcome to all the new subscribers, it’s a privilege to have you here. Please share with as much of your entourage as you can. Thank you.

As promised, this is the start of a series dedicated to helping you in a practical manner, start and develop your Digital Transformation.

On to this issue.

In order to start your Digital Transformation journey, an initial diagnostic is necessary to understand the digital penetration in your business operations. Most of us have email, file servers and dedicated financial software (billing, accounts etc.). But I have found that these are mostly self-contained applications silos that don’t offer any value outside their basic usage. Digital Transformation helps to resolve this situation, enabling benefit from potential synergies. Simply put — Synergy is the creation of a whole that is greater than the simple sum of its parts. Classical strategy analysis is sufficient to start the process, with more digital specific strategies developed as you progress.

Once you have completed these analyses, the next thing to do is to determine what strategic directions you would like to pursue. You don’t need to definitively decide immediately; you can try small scale tests to determine their success and scale out as and when appropriate. Additionally, at this point, it is important to determine what KPIs to measure and follow, as this will help you determine if the test is successful or not. They will additionally be useful to determine the success of full roll out too, work done here is not lost.

After the first two steps, it’s time to determine what projects to start, when and then plan them for implementation and rollout.

Photo by Startaê Team on Unsplash

Basic Diagnostics

In classic business strategy, an initial diagnostic is required to look at the internal elements of your business and the external factors that have an impact on your business. These are called micro and macro analyse, and they are quite simple to perform. However, having them undertaken by an external party is more likely to ensure an objective result.

The most recognised tools used are called PESTEL, Michael Porter’s Value Chain and SWOT analysis. I’ll look at them individually in this series, and work through some examples.

PESTEL

So-called, PESTEL, is a framework that aims to help you think about the factors that affect your business from the exterior. PESTEL is an acronym for the part of the framework; Political, Economic, Social, Technological, Environmental and Legal. Using PESTEL, we try to identify the things taking place in the market, like growth, decline, trends, legal threats, environmental factors and so on. Let’s look at each part individually.

Political

What is important with the political factors, is to think about the impacts the political environment may have one your business, be it good or bad. Some political decisions have important effects on a business — no, I’m not going to mention Brexit ;) — and it is important to note the political position and determine what affects may impact you. There are many examples, but one that gained major attention in the media was the GDPR, General Data Protection Regulation, implemented in Europe but having global implications to businesses that had European customers. The end result was a Technological impact and cost, but the impetus was political.

To go about this, you need to research a lot about your political environment and also have a good understanding of the political environments that may affect you in the future. In the Caribbean, we are obviously affected locally by associations like CARICOM, OECS etc, but wider-ranging impacts may be felt from Europe and the US. The French West Indies are actually Europe… Its closer than you may think!

Economic

Clearly, it’s important to take in to account the economic climate both locally and more generally in your region, which gives you a better understanding of the issues of region. Again, research is the name of the game and you should avail yourself of the latest economic reports and papers in you region, then interpret them to get a handle on factors that may directly impact you, like the dollar/local currency exchange rates and their historical tendencies, tax rates, unemployment rates, level of training by population type etc. 

Social

Sociological changes are happening at a pace never before seen. Generation Y and Z have social attitudes that are alien to Generation X or the baby boomers. Populations are getting older and people are living longer. These are the types of indices required to understand the impact on business. A young child these days thinks nothing of listening to music, whilst watching YouTube, all simultaneously playing Fortnite. Technology has enabled this, but youngsters have embraced and enhanced it.

Tehnological

As a technology nerd since the 80s, I have seen lots of technological changes in consumer products and also businesses. But nothing has evolved so rapidly and so completely as the changes that were enabled by the Internet. The internet enabled bigger, more distributed, and more importantly, more connected applications that we a fantasy only a couple of decades ago. Technologies like, IoT, CRM, Cloud Computing and Data Visualisation (there are many more) are important to recognise, as they may provide strategic advantages to you or your competitors.

Environmental

In an age of climate change concern, an eye on your environmental impact and what impacts may be as of a consequence if you chose one strategy over another. More and more clients, be that B2C or B2B, are requesting environmental impact assessment reports before signing contracts or purchasing products. It’s important here to note current factors and think about how they can be improved upon. Eventually standards like ISO, might be useful to discuss at this point too. Depending on your business, there are standards available to help you better align with the wishes of your customers. ISO 9001, Quality Management, is a classic, but others more specific exist, for example a client of mine would benefit from ISO 41001, which deals with Facilities Management.

Legal

Lastly, looking at the legal landscape may help you understand your roles and responsibilities in your region in a deeper manner. As highlighted above, the GDPR had political effects, technological effects, but was implemented and enacted through legal means. Other legislation and regulation need to be identified here. If your region is anything like mine, the number of texts proposed and finally made to law has exploded over the last few years. Even local laws may have a substantial effect on your business. Take for example a restaurant implanted in the town centre, a simple change to parking laws may substantially increase or decrease the number of clients passing through, and consequently your revenue.

I’ve designed a simplified example PESTEL analysis diagram, for a hypothetical fast food restaurant chain called McCowen’s. Feel free to use it and modify it as you see fit.

Simplified PESTEL for fictitious Fast Food Restaurant McCowen’s

Next issue, we’ll take a look at Porter’s Value Chain, hope to see you then.

Available for Consulting

As a consultant, I am available to perform this analysis with you. In fact, I’ve noticed that outside eyes are an excellent complement and better indicator of reality than those clouded by the viewpoint of the inside. Contact me (hit reply to this email) if you would like to discuss further, I’d be honoured to help.

Reading List

Carpooling saves more than 1.6 million tonnes of CO2 a year, whilst doubling the number of people traveling - BlaBlaCar

European carpooling service BlaBlaCar, using its blog, cites a study conducted by BIPE that concludes that its digital product — a carpooling aggregator — has doubled car occupancy to 3.9 persons per car (1.9 per car without BlaBlaCar) whilst simultaneously reducing CO2 emissions by 26%. This is a long way behind bus emissions and occupancy rates of around 60% on average but is a step in the right direction. This could only be enabled by Digital Transformation.

Woebot - Should This Exist

Sometimes Digital Transformation crops up in unexpected quarters. This is a great example, where AI is being used for counselling, helping those affected by depression and other mental illnesses. It doesn’t replace therapists, but I’ll let you listen to the podcast for yourselves. A full transcript is available for those who prefer to read. 

The scooter wars are actually a century old - Fast company

In 1916 a suffragette called Lady Florence Norman travelled regularly to her office on a motor scooter her husband had purchased as a birthday present. A fascinating look at the technology and societal impacts.

The Future is Digital Newsletter is intended to be shared as widely as you see fit, and I encourage you to forward it to people you feel may be interested in these matters, CEOs, Business Leaders, Influencers. Thank you.

Thanks for being a supporter. Best regards.

And a request for feedback

Good morning. This will be a short issue as I am currently on convalescence after a major RTA due to no fault of my own. We’re fine, so let’s not dwell on that too long!

I usually pre-write a number of articles but this time I didn’t have the time to finish anything that I would be proud to publish. In that respect I thought I’d take a quick retrospective look at the past issues and show you what I’m currently working on as drafts and ideas. I’d love your feedback (hit reply to this email) about these in-progress topics and if you think I should cover anything else. I know many of you are French native speakers, don’t be shy, write to me in French ;) Oh, I’ve also added a nice little header graphic to each email.

Anyways, as always, I’m very grateful for your support and I hope this newsletter is of value to you. Have a good weekend.

Retrospective

I’ve so far written and published 8 Issues on subjects that trace the beginnings of digital technology to looking at the current state of digital in this region. Along the way I’ve taken a look at a couple of local initiatives (more are coming) to implement Digital Transformation strategies and only time will tell if they are successful or not.

A couple of articles have touched on the strategic and psychological aspects of the effects of this revolution in business. I even discussed the very definition of Digital Transformation, after witnessing after talking to clients and contemporaries, that a globally accepted definition of Digital Transformation doesn’t exist — mine is a best attempt.

Work in progress

What have I been working on and what other ideas do I have on the boil?

Blockchain

One of the biggest subjects related to Digital Transformation is Blockchain. I’m currently researching its beginnings and potential use scenarios from cryptocurrencies to supply-chain management possibilities. As I’ve previously stated, I am very sceptical of the future of cryptocurrencies, so I’d like to get in to the weeds on that.

Aggregation Theory

I’ve references this a lot over the weeks, so I thought it would be good to better explain what it is and why it is important.

Autonomous Vehicles in the Caribbean

You can’t move these days, without coming across talk of fully autonomous cars on the roads anytime soon. Some companies are literally spending billions of dollars, but seemingly progressing in fits and starts. I’m writing about the potential and the difficulties in relation to our market. While we have many things in our favour (climate for electrical recharging - let’s face it they are going to be electric) but those same advantages present enormous difficulties.

Ride-sharing in the Caribbean

If your island is anything like mine, the state of local public transport is an utter mess. We live with it in two ways. We shut our mouths and just get on with it, or we buy a car. Surely there’s a better way? This article was written a while back, where as a thought experiment I wondered if ride-sharing could be part of a better public transport mechanism, better adapted to our particularities than mass public transit (buses, trains, trams and subways).

Practical examples of Digital Transformation

Theory is all well and good, so I think it’s high time I write about some practical examples of Digital Transformation and how you can envision your own transition.

Management Obesity

Digital Transformation and automation is understandably, very scary for workers. Particularly those in manually repetitive roles, but I’ve had a theory for a few years that it is actually middle-management that has most to fear from AI. I’d love to expand on that and debate in public these ideas.

The Security and Privacy Wars

Digital information, being inherently reproducible quickly and widely with minimal effort and minimal cost, provides purchase for the worst of us to exploit these data to devastating results for some — see the Mexican Rockstar that took his own life recently (btw, I have no idea if he is innocent or guilty, that’s not what this newsletter is about). But what is evident, is that a new digital war has erupted between the biggest of actors pushing the virtues of their security and privacy policies. I’ll not get in to the details of who is better and worse, this is more of a philosophical discussion on the conflict.

That should keep me busy for a while. Let me know what you’d like to read first and if you have a fetish topic, you’d like me to explore. Once again, have a great weekend.

Reading List

CDB grant to help CARICOM Investigate suitability of plantation white sugar for Regional manufacturing - CARICOM

Ostensibly not a Digital Transformation story as it an economics topic (imports versus exports of white sugar). However, when you look in to the details, they are financing what I have been advocating for years now, better data availability to help make better business decisions. You should read and reflect on this if you run a business. Improvising, intuition or using the “The Force” to run your business is nothing short of suicide in present times. Regardless of the fact that your business plans and strategy may require no changes, your clients are changing, and it is that change that will eventually for change upon your business.

Guadeloupe Moves to Set Up Internet Exchange Point - OECS Business Focus

Great news for the internet infrastructure in the French West Indies. Coupled with the current rollout of FTTH in Martinique, Guadeloupe and Guyane, this can only have positive effects for digital business locally.

Barbados Innovators Find Difficulty Accessing Financing - OECS Business Focus

This is clearly a problem across the region. There’s surely a better way to finance start-ups by the banks and their partners. Perhaps CARICOM or the OECS could group its members to form an association to promote inter-regional financing for entrepreneurs?

The Future is Digital Newsletter is intended for a single recipient, but I encourage you to forward it to people you feel may be interested in the subject matter, it really helps. Thank you for your support.

Have a great weekend.

Stats and stats (... at least I'm honest)

Good morning and welcome to another issue of the newsletter. As I write this, it’s been announced that the EU has approved by the new Copyright in the Digital Single Market Directive, the FT has a summary here. To be honest, by linking that article in my newsletter, I’m unclear if I would be breaking the law once it becomes legislation in my territory. I guess we’ll find out in a couple of years or so.

Next week I want to get into some of the practical things you can do to start your own Digital Transformation process. But for now, on to this week’s Issue.

Up until now I’ve been focused on the historical aspect of Digital Transformation and how we got here from the early beginnings in digital technology, but this issue is a look at the current state of digital from a Caribbean context with a short overview from a global perspective.(1)

Digital in the World

When you look at the state of digital usage in the world in 2019, a few interesting statistics stick out when observing in relation to the population of the world, which in January 2019, was 7.676 billion people however, 8.842 billion mobile phone subscriptions exist, think about that for a minute. More than the world’s population has a mobile subscription — 115% to be precise. 

Social Media penetration is running at just under half the planet, with 3.484 billion people on social media, 45% of the world’s population. Around 3.2 billion use mobile for social media, that’s 42%, which is in line with the amount of Internet traffic attributed to mobiles at around the same percentage.

If we take a look at growth, we see the population of the world steadily growing by just over 1% since 2014, but Internet users have grown by 9.1% in the last year. Social media use, despite the scandals, is growing at 9% too, with mobile accounting for 10% of that growth. Clearly mobile is where most of the world’s growth is, even if the amount of unique mobile users is only growing at 2% since 2018 (that’s more than 100 million new users per year!).

Globally, daily time spent on the Internet is 6h42m in January 2019 on average, last year that was 6h49m so a slight decrease was observed. However mobile made up 3h14m of that time, an increase of 4.3% from 2018. Mobile is taking over Internet usage. I’m guessing that by 2020 mobile Internet use will make up over half of the total Internet usage in the world. It’s currently at 48%. That’s corroborated by the statistics that show a clear decline in Internet usage on computers and tablets from 4h32m in 2014 to 3h28m in 2019, nearly a quarter of a drop.

Digital Infrastructure and usage in the Caribbean

The Caribbean is a widespread and diverse region, so I have concentrated on the 16 islands and territories of the Eastern Caribbean and averaged out the statistics, highlighting exceptions when and where interesting.

Starting with some of the basic elements, Internet penetration across the Caribbean is at 51% as a percentage of total population. Mobile subscriptions are running at 74% of the population but some places show extraordinarily high or low rates of mobile connections. In detail, most places have a number of mobile subscriptions that is higher than the population, but two French territories skew the figures with very low rates; Saint Barthélemy at 35% and Saint Martin at 31%. Removing these gives us an average of 151% across the region.

Literacy rates are reasonable across the region, with an average of 96% literacy of the total population, which is critical for digital services, where reading and comprehension are primordial. Although, if we look at the wider Caribbean literacy falls to an average of 84%, which is low, but an opportunity for audio and video content perhaps?

The average percentage of mobile Internet connections in terms of population is 65%, which is translates to 36% of all Internet traffic. The rest is shared between fixed broadband connections and tablet devices using mobile (tethering) or wifi.

Internet growth is virtually zero, with only a couple of islands showing any growth, Trinidad at 6% for example, and Grenada comes in at the top of the list at 10%, not counting the incredible figure of 368% for Saint Barthélemy! Not sure if this is a late coming to the party or a symptom of another phenomenon. I’m intrigued and will investigate.

The most startling difference in the region is the split between post-paid and pre-paid mobile connections. The French West Indies (excluding Saint Martin and Saint Barthélemy) is heavily oriented towards post-paid, whereas the English West Indies is mostly pre-paid. Martinique and Guadeloupe have 64% and 56% respectively, of all mobile connections post-paid, with Saint Vincent and the Grenadines (91% pre-paid) and Dominica (92% pre-paid) having the highest ratio pre to post-paid. Bizarrely, Saint Martin and Saint Barthélemy both show 100% pre-paid, however I suspect this is a result of how Orange, Digicel and SFR structure their accounts in these islands, skewing Guadeloupe’s figures a little. Those islands, including Marie-Galante have historically been administered as part of Guadeloupe.

Observations and opportunities

So, in conclusion, mobile is where it’s happening! All of your Digital Transformation strategies should take this in to account. Mobile is a different beast, where attention is not intentional like a computer. Often you browse something on mobile because you are in a queue or have a couple of minutes at the doctor’s surgery.

Video is King. In a recent report by wearesocial called “We are Gen Z”, a sample of Generation Z were observed and quizzed on their Internet usage, amongst other things. One striking highlight showed that they tended to use video content not just for passive observation, but for active participation and learning.

“I wanted to buy a bike, but I couldn’t find the one I wanted and that I could afford, so I built it myself watching YouTube.”

The report stated “YouTube and Instagram are key learning tools, with the former acting as a source of knowledge and entertainment combined. This clearly is an opportunity for business in the Caribbean to reach out and connect with users across the region.

According to the main source for this issue, 54% of organisations report that social media is being used outside of the traditional departments of marketing and that this is an opportunity for Marketing to guide and influence the expansion of Digital Transformation in their businesses. Those without Marketing will find this new world more and more difficult to compete in if they don’t have a developed Marketing group in their organisation, particularly when other enterprises have aligned KPIs throughout their businesses to measure and react to specific business objectives like revenue, satisfaction and customer retention being implemented transversally.

Another statistic that may surprise you. The average user today has 8 different social media accounts and messaging services. You must bear this in mind when you are developing your digital marketing strategy to ensure you have consistency across those platforms by linking data and its usage. This is extremely difficult to doubt it will offer an advantage over your competition.

Next week, as promised I’ll highlight some of the practical things you can do to start your own Digital Transformation.

Reading List

 Marrying tourism and digital agriculture to benefit female farmers in Saint Lucia - CARICOM

These are the kinds of stories I hope to hear about more often. Something that is tangible and on a Caribbean scale. I’ll let you read the article, but suffice to say that this is real Digital Transformation on a practical level and something that hopefully after the initial trial period can be extended all over Saint Lucia providing a model for other territories to follow. Digital Transformation is inherently social, so feedback and knowledge sharing throughout the region will certainly benefit all.

Uber Freight is expanding into Europe - TechCrunch

This is a good example of digitalising supply and demand to drive efficiency. It’s using a similar model to the classic Uber rider-Driver dynamic, using trucks (and drivers) to pool their availability to hook up with logistics shippers. It’s certainly one to watch to see if the model can be applied in a Caribbean context where we’re all the more dependent upon imports and getting those from port to shops.

New mobile broadband pricing data reveals stalling progress on affordability - web foundation.org

There has been talk of a digital divide since pretty much the time the Internet got popular. Looking at the above analysis of digital in the Caribbean, where Internet penetration is at 51% when in Europe and America it is XX% and XX% respectively, there is real truth the saying. This report looks at the associated costs of Internet access and we can see that the poorest regions are in fact the most expensive. Looking at the FWI compared to the English speaking Caribbean, let’s take Barbados as an example, in Martinique a mobile subscription from Orange of 100GB per month including 20GB/year roaming in the US and Canada will cost you 69€ ($156 BBD) per month, in Barbados with Flow 200$ BBD per month will get you only 20GB of data per month and roaming only in the Caribbean, no US/Canada. Its not much better in Jamaica, with 69€ ($9800 JMD) netting you a little over 24GB per month.

The Future is Digital Newsletter is intended for a single recipient, but I encourage you to forward it to people you feel may be interested in the subject matter, it really helps.

Thank you for your support, have a great weekend.

1 All statistics were taken from Hootsuite and wearesocial’s digital reports (Datareportal)

Why it’s so fundamental to Digital Transformation

Good morning, from the eastern Caribbean, its sunny, warm and very dry here currently. We’ve had a couple of local brush fires with one getting perilously close to housing. Well, it’s Issue 7 already, and others are in the works, thank you for being loyal readers.

This week’s issue dabbles in a little theory — bear with me — it’s not as heavy as previous issues, I hope the illustrations will help you relate. Enjoy and let me have your feedback, it really helps.

Lastly, today is World Water Day, clearly water will become more and more of an issue in the world as we simultaneously increase our population and continue heating the planet. Digital Transformation can help optimise water usage and I heard of an experiment in Martinique by a local water authority, I'm gathering research to write about it in the near future.

On to the update.

Many of you will have seen or read about Facebook’s recent pivot to a more privacy-based social network entitled “Privacy-Focused Vision for Social Networking”. It is absolutely absurd to think this is a change to Facebook’s core product, which is, targeted advertising. This is a completely separate product strategy, with focus on messaging, and in some respects only continues the original purpose of WhatsApp before it was acquired by Facebook. Although, this being Facebook, many questions are left to understand what business model they will employ to gouge money from us… I’m sceptical, to say the least.

However, credit where credit is due, this is an extremely smart decision by Facebook for two reasons, and it serves as a lesson for smaller businesses on the road to Digital Transformation. Let’s take a look at each one.

Taxing and Crediting Strategies

The first reason is something that Ben Thompson coined as “Strategy Credit”. Facebook has, within a 3000 word post from its (I’ll let you insert your own adjective here) CEO Mark Zuckerberg, using its own product, gained attention of not only the tech media, but also the general media in a strategy designed to sway public opinion from the ghoul that Facebook ‘used to be’, in to the angel with a product that “cares” about your privacy.

The definition of a Strategy Credit is, “an uncomplicated decision that makes a company look good relative to other companies who face much more significant trade-offs”, as defined by Ben Thompson. Another great example is that of Apple’s strategy credit when talking about privacy. Apple’s efforts in AI and ML start and are processed on device with no personally identifiable data sent to Apple. That’s the credit that Apple can publicise as it actually costs them nothing because the system was originally designed that way from the outset.

The inverse is a Strategy Tax, whereby the company designing and implementing a strategy unwittingly reduces or otherwise cripples itself in perception and credibility. An example, and a real classic is what is known as the Osborne Effect. Adam Osborne, the CEO of Osborne Computer Corporation, announced that new generations, the Osborne Executive and the Osborne Vixen, were to be better, faster, cheaper than the current model, the Osborne 1. He was actually very honest and very accurate, but unknowingly to him, this “taxed” his strategy, because the bottom fell out of his current sales book because everyone suddenly wanted the ‘new’ thing and not the old one, which put his company in financial ruin in a very short space of time. So much so in fact, that the company went bust before the next generation machine was ever released to market, in turn killing completely the Osborne Computer Corporation and all its products. Incidentally, the term strategy tax was first coined inside Microsoft in the early 1980s.

The Osborne 1, courtesy of oldcomputers.net

Facebook’s Strategy Credit is its ability to say that it is secure and privacy-focused now, and that Apple is not. Facebook cited the fact that they would under no circumstances operate data centres in countries where the ruling regimes have sketchy privacy records, whilst not naming Apple directly, everyone knew they meant China and that they got a free dig at Apple. Apple has openly stated that it operates its iCloud services in China using the data centres and infrastructure of a China-based organisation (Guizhou-Cloud Big Data) which has strong links to the Chinese Communist Party and the government of Guizhou.

One last point, I touched upon in the early part of this discussion, Facebook and more specifically Mark Zuckerberg, use their own tools to publicise their strategy, choosing not to go through a PR firm or announce to the press. They have that much power and they know it, which is one of the reasons why the Strategy Credit move was a smart move. Remember this initiative is in addition to their core products.

Innovator’s Dilemma

The second reason makes me believe that Facebook is well aware of what is termed the Innovator’s Dilemma; whereby successful companies and business models can do everything right and yet lose market share or even completely fail due to new and unexpected competitors entering and eventually taking over market share.

This is a common threat when you are dealing with digital products and services. By definition, digital goods are easier to distribute and copy but more importantly, if your clients see a new product or service and that their sunk costs are sufficiently low as to avoid the sunk cost fallacy — I wrote about it briefly in Issue 4 : The Digital Transformation Model in detail:

The sunk cost fallacy explains why, when faced with difficulties to complete a given project, we have a tendency to stick to the original plans in proportion to the amount of time and money invested. That is to say, having already spent a ton of money on a project that is clearly destined to fail (where the evidence is there to prove it), the scope is often revised in order to finish a project, even if it isn’t the project.

The following graphic I made attempts to articulate this dilemma: 

The orange line traces the lifecycle of product A that has some success in the market, but as we can see product B, represented by the blue line, has started to gain some traction, but not currently enough to be on the radar of the company selling product A. As the revenue hits the peak and starts to decline we see that product B has gained more sales, so much in fact, that it has become a real threat to product A — this usually happens because it resolves the jobs to be done of product A, either faster, better or cheaper than product A — eventually overtaking product A to render product A obsolete and thereby cutting off revenue for the company selling product A.

Obviously, the best position to be in is that of the original innovator and the disruptive innovator in order to profit from the new product. That’s easier said than done. However, let’s look at an example of such a move.

In 2001, Apple Computer, Inc., launched a surprise product that could hold “1000 songs in your pocket”, the original iPod. Many years and generations later the iPod reached all-time sales numbers with nearly 54 million in 2008, as shown in the chart below. This was by far the most successful electronics product of its era.

Source: MySchizoBuddy - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=7047449

Apple realised that these sales numbers couldn’t continue forever just by iterating on the core product, so it set about producing a whole new product category, which eventually was released as the iPhone. The iPhone solved the innovator’s dilemma and its sales dwarfed those of the iPod, completely cannibalising the original product. In fact, during the keynote presentation — still one of the most remarkable presentations of a product — Steve Jobs even said it had amongst its three tent-pole features, the first being a wide-screen iPod with touch controls. The chart below illustrates this well. If I were to chart Average Selling Price (ASP), the difference would be even more flagrant, as the ASP of the iPhone is way higher than that of the iPod.

Source: Statista

Incidentally, it’s common to mistake iteration for innovation, it’s not! I should write about that in the future… Note to self.

Facebook has been almost as ruthless as Google when it comes to killing off projects that are going nowhere, Notify, Parse, Deals, Gifts, Offers, Inbox, to name a few. They have additionally been as ruthless in their acquisition of potential threats to their business, illegally so, some would say. Their acquisition of Instagram was to head off the very real threat of Snapchat, and the purchase of WhatsApp served a similar purpose.

If you don’t innovate, someone else will

So why is it so important in Digital Transformation? The sub-heading explains pretty much all you need to know. If you don’t innovate, someone else will, and they’ll pull the rug from under your feet when you least expect it.

If you are currently going through, or are about to start your Digital Transformation journey these are some of the concepts you need to understand. For further reading, I recommend the books by Clayton Christensen, the Innovator’s Dilemma and the Innovator’s Solution.

Reading List

What Customers Want from Your Products - Harvard Business School

A short, but concise article about the concept of jobs to be done. Although written in 2006, it’s still a good primer to understand the concept.

By understanding the job and improving the product's social, functional, and emotional dimensions so that it did the job better, the company's milkshakes would gain share against the real competition—not just competing chains' milk shakes but bananas, boredom, and bagels. This would grow the category, which brings us to an important point: Job-defined markets are generally much larger than product category-defined markets. Marketers who are stuck in the mental trap that equates market size with product categories don't understand whom they are competing against from the customer's point of view.

 30 years on, what’s next #ForTheWeb? - web foundation.org

An open letter from the World Wide Web’s creator, Sir Tim Berners-Lee. Despite the current climate, he remains positive, whilst simultaneously acknowledging the dangers. I think the web has so far been an overall positive for society and I’m hoping it will stay that way.

French-founded digital health startup Doctolib raises €150 million at a €1 billion valuation - tech.eu

Not all unicorns are born in the USA. A good example of Digital Transformation in practice is what Doctolib is. It solves not only the problem of discovery, which is essential for internet businesses, but it additionally reduces friction for patients needing to get to a doctor, with even a possibility to get an appointment that day. Doctor’s Surgeries also benefit from reducing their administrative burden, allowing them to concentrate on their value-add and not bookings and cancellations. To be truly successful, the platform needs to expand, and this funding should help them do just that. Their business model is simple, a subscription for the professionals and a free to use application for patients, ensuring demand is high enough to enhance supply.

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