Embracing the Fourth Digital Transformation

 

We are now at the dawn of the Fourth Digital Transformation. The disruption brought by digital is impacting existing business models like never before. And it is not likely to stabilize any time soon. The next wave of digital transformation is just around the corner…

In this blog post I want to cover the following subjects:

• the fading of classic interfaces and the rise of new customer touchpoints
• the new-middle-man platforms, introducing new middle-man functions
• how to build a platform strategy that embraces this change.

Drivers of the Fourth Digital Transformation

To understand the fourth digital transformation, we first need to understand what is happening today. And a lot is happening today!

• Chat-bots, voice control, and smart digital agents, are bringing new ways of communicating with brands.
• Virtual reality, enhanced reality and mixed reality are entering our lives, impacting the way we consume information, the way we work, and the way we buy products.
• The fin-tech world is introducing convenience in payment methods. Examples are Apple Mobile Wallet or new fin-tech entrants like Stripe, 21INC, Square, or even Kickstarter. They are disrupting the way we think about money and banking in general.
• Packet delivery by drones, location based logistics from Parcify, and 3D printing are changing the way we think about logistics and manufacturing.
• Personalization and customization is entering the world of consumers, making them accustomed to hyper-personalized communication, products and services.
• Subscription based business models from Walmart, Stitchfix, Birchbox, Ordergroove and others are bringing products as a service.
• And the sharing and borrowing economy, in which we want to own little, consume more, and experience more, are brought by Uber, AirBNB, and all its copies.

This is what we know and see today.

In all this chaos, with new start-ups entering the market literally every day, what is really happening?

As we have moved from mainframes, to graphical interfaces, to smartphones today, we are now moving into vision and sensing.

Interfaces are fading, and soon it becomes all about the experience.  

Welcome to the 4th digital transformation…

Fading interfaces

25 years ago my dad bought our first family computer, an IBM XT. It was a big machine with a heavy clunky computer screen on top of the computer, hooked up to a black-and-white mechanical matrix printer with a big fat cable. Do you still remember the sound? trrrrrrt…trrrrt…trrrrt.

Flash-forward 25 years and I’m talking to my smart watch. I tell my Amazon Echo to play music from Spotify. My Nest is quietly doing its work in the background, until I tell Alexa to slightly turn up the heater.

On the other hand, I am still typing this blog post on my laptop. And I still often use my smart-phone when I am on the road.

But I believe the way we work and interact with systems around us will drastically change….

From reactive to active systems

Today we still need to command systems, before they do something for us. “Siri, what’s on my agenda” is a working gimmick on my smartphone, although it has little added value to me. So I don’t use it a lot.

But what if Siri starts doing things automatically, like booking your favorite restaurant, communicate with my contacts to resolve a conflicting agenda appointing, and recommending holiday destinations. The device recognizes a pattern, and then acts upon it.

We can already see it happening on our smartphone with Waze, the popular GPS-navigation app from Google. Waze is trying to predict where you are going next. LinkedIn is already making suggestions on how to prepare for your next meeting. It can do that because it has access to your calendar and who you are meeting. Facebook is warning you it will be raining soon at your location, and that you better get your umbrella ready. And if Tesla cars can’t find anything in your agenda, it will automatically plot the route to your home and start driving you home.

More and more systems, algorithms and software will make autonomous decisions for us. Soon these systems will be buying stuff for us, because they predict we need them.

How will autonomous decision making by artificial intelligent platforms impact your marketing?

 

From Carrying to Experiencing Technology 

Google Home, Amazon Dash, Dot and Echo, but also Microsoft Hololens. All examples of large players building new types of interfaces. These voice controlled, gesture and vision controlled smart assistants, also sometimes called smart agents, make use of artificial intelligence platforms.

You might have not seen them in real life, they are entering our personal and professional life in the coming 5 years.

It’s going to be big. The examples of Amazon, Google and Microsoft are only the beginning. It’s the rumble before the storm, so to speak.

Apple and Google have been been acquiring technology companies the last few years.

• Google bought Eyefluence in october 2016. Eyefluence has developed a very advanced eye-tracking interface. Eye-tracking is a very important technology to future virtual reality headsets.
• And investors like Alibaba, Google and others have been poring billions (!) into a secret company called Magic Leap , of which a first prototype leaked to the public recently.
• Back in 2013 Apple bought Primesense, the company that developed the original Xbox Kinect. In 2015 Apple also bought Metaio , a well-known company powering many of the popular augmented reality (AR) applications used today (like the IKEA virtual catalog, and Ferarri’s AR showroom app), and in 2016 they bought Flyby Media.

Robert Scoble, American blogger, technical evangelist, and author , thinks that Apple will be  releasing an AR headset in 2017.

 

A teaser from Magic Leap, the secret company backed by billions of dollars from Alibaba and Google.

 

 

Location Aware Devices – Spatial computing

And, surprise surprise, Google and Apple have been working together, to develop the image-recognition capabilities found in Google’s Project Tango.

Project Tango is Google’s Augmented Reality Computing Platform.

Combined with the right hardware, it brings indoor navigation, 3D mapping, physical space measurement, environmental recognition, augmented reality and more, into a virtual world.

As an example, Aisle411 demonstrates what’s possible today in terms of indoor navigation for retail purposes. Other examples include Lowe and iStaging, which demonstrated what it can do for them for interior design.

Project Tango is the first platform that shows the power of spatial computing. Spatial computing is the concept that computers can learn where certain objects are located in the physical world, and overlay virtual objects.

 

In the beginning the interfaces will still require some form of command and control, and most probably will be somewhat clunky, as my first XT computer back in the 80’s.

But in only a couple of years from now, these devices and the smart digital assistants behind them, will become more and more invisible and less intrusive, acting as a natural and fluid part of our daily and professional lives.

How will you react to these fading interfaces? How will you react to a world without interfaces where it is all about the experience?

 

Software “eating” marketing and sales

Companies today are implementing new ways to bring added value to customers in new ways. They introduce marketing innovations such as content marketing, personalized and predictive product recommendations, and near-real-time customer service.

By 2020, most customers will manage 85% of their relationship with a business without talking to a human being, according to Gartner.

But although the majority of the conversation will be digital, when they do want to talk to a business, they want it faster and faster.

They expect near-real time communication. This is driving early adopters to experiment with new types of customer touchpoint such as chat-bots, video-calls, but also instant logistics in ever decreasing delivery times using drones and 3D printing.

Marc Andreessen penned his famous “Why Software Is Eating the World” essay in The Wall Street Journal five years ago. Today it is, more than ever, very relevant.

This also brings us with the disruption that digital is bringing to the world of sales. Customers no longer buy from sales-people. Where classic salesmen used to have the task of informing, educating and convincing customers, the role of sales is under pressure. Today it is being replaced by software, algorithms and dominant-player-platforms from Google, Facebook, Amazon, Alibaba and Apple.

If you control the platform, you also control the supply chain.

As an example of a potential future way of buying is brought by Blippar.

Today Blippar is just a an app on smartphones, capable of recognizing objects. I’ve tried it and it works surprisingly well, although it doesn’t recognize all objects, and it still make a lot of mistakes.

But the potential of Blippar is massive: imagine you are seeing an object you like, let’s say a pair of cool sneakers that someone is wearing. Next thing you do is walking up to the person and asking ‘Can I “blipp” your shoes?”. You point your smartphone to the shoes, and you “blipp” them. By “blipping” the shoes, you buy the shoes, in the right size…

If you control the platform behind Blippar, you will also control the supply chain…

How will you react to the change in buying behavior of customers? Is your future customer a robot? Will marketers of the future need to market to robots and algorithms?

 

The NEW “Middle-Men” Digital Platforms

 

Uber and AirBnB are the stereotype examples of “digital disruption”. They’ve shaken up many industries, and many start-up’s are claiming to be the next Uber, iTunes or AirBnB of a random industry that needs disrupting.

The disruption they bring is that they cut out the so-called “middle-man” players.

In the music industry iTunes has cut out physical music shops, and in transport they Uber has cut-out intermediate taxi-companies and brought taxi drivers straight into contact with customers. Numerous examples are available, and as time moves, more and more industries are being disrupted by combining existing technologies in a smart way.

My claim is that we now are seeing a fight among the large digital platforms to claim a whole new middle-man position.  IBM, Facebook, Google, Apple and Amazon are best placed to take that position of new middle-man. They are pouring billions of euros or dollars into artificial intelligence, machine learning and new gesture-, vision- or speech-driven interfaces.

Why are they doing this? Why are they driving people to use these new smart digital agents?

By having people using these smart agents, they also control the interface that decides who will be sourcing the products you buy through the interface. They also have control of the platform that controls the lighting in your smart house, or the platform that decides that milk needs to be ordered for your smart fridge.

If you control the platform, you control the customer.

Is this all bad? Of course not. Many consumers and businesses absolutely don’t care. As long as they can enjoy the benefits of these smart agents for free, or for a low price, they are right to use these platforms.

But the impact on marketing is certainly an important one:

• No access to end-customers:  you no longer have direct access to your end-customer, because the platforms serve as an intermediate. This means that any moment in time they can change the rules in which are using their platform to interface, advertise or use their platform in general.
• They control the access to products and services: using these new interface, new types of App Stores, search algorithms and advertising solutions will be implemented by these platform players. If you want customers to buy your products through these new interfaces, you will have to pass through the platform. The problem is that  you do not own nor control this platform. That means that you will have to pay to play.

Again, it’s not all bad news.

I don’t believe we are into a doom scenario where these big players crush everything around them. That would be counterproductive, also for them…

 

How to Embrace the Fourth Digital Transformation?

The amount of change coming to marketing managers and business leaders is certainly overwhelming.

It’s a complex problem that requires strategic thinking.  Smart brands can stay ahead of the curve by embracing the change ahead. They work with the dynamics of the market, riding the waves created by the giants of the internet.

Some of the strategic questions that need answers in this context:

• How will you market to customers in a world where customers no longer visit websites?
• How will you sell to customers in a world where customers buy products using buying agents or algorithms?
• And how should you work with these internet platforms that you do not control?

 

Building your platform strategy

 

There are 2 elements to building your platform strategy.

Building a platform strategy, requires understanding of your current customer journey. You will also need to start understanding how these new technologies will be impacting the customers journey. That’s the first dynamic to take into account.

The second element that will inform your strategy is the type of business you are in:

• If you are in a niche market, it remains a sound strategy to continue to build your “owned” platforms. This means that you build your own web-platform that you control. When you build this platform, you want to keep an eye on how you can integrate the upcoming new technologies.
• On the other hand, if you are playing in a mass-market, I believe that you’ll need to find a way to keep riding on top of the large player platforms. I do not think it is possible to build your own mass-market platform, unless you are the 1% unicorn start-up. Don’t even try to become the next Google or Facebook because you’ll fail.

There is a high probability that the big platform players will continue to provide options to use and integrate into their platforms:

• Will they open up the technology using an app-store, for developers to build apps? I think that’s a very likely option.
• Google and Facebook will probably also have advertising options, to make sure your products are found through these new AI, VR and voice controlled interfaces.

You can already see some early indications that support my thinking.

For example, IBM with IBM Watson has developed a Artificial Intelligence Starter kits and developer tools. Facebook has some options to build chat-bots on their platform. Apple has Sirikit. Google has open-sourced their Deepmind Lab environment.  Amazon has a whole developer platform that opens Alexa to 3rd party developers. And finally Alibaba is making great strides with their YunOS .

 

That’s it for this one. If you liked this post, why don’t you share it on social media?

As always, if you have feedback, use the comment function, or just drop me a note on Twitter @tomdebaere.

Warm regards,

Tom De Baere