I’m often asked whether the CIO should report to the CEO and why.  About 40% do;  the majority don’t – even in this digital age when tech seems so important to everything.  Looking back at the last 15 years or so, I think it’s quite clear that CIOs usually report to CEOs when there is a “great” IT mission in play.  If there isn’t one, then IT is more of a maintenance function making sure business-as-usual runs smoothly – and that might not warrant the CEO’s frequent attention.

A great IT endeavor is one where a technology based change to the business is going to have a multi-year, material affect on financial performance. That means either the revenue or the profit of the company is impacted in a way the investors will notice and care about. There have been many of these great endeavors – some of them quite general purpose and multi-sector for example:

Y2K
E-business
CRM
ERP

But often the great endeavor is industry specific.  And sometimes an industry can have a fallow period where there is no obvious IT great endeavor. For example I spent many years in airline IT, where over the decades there have been a number of great endeavors that had huge bottom line implications:

Distribution systems
Revenue management
Frequent flyer programs
Schedule and reschedule optimization
Web direct selling
E-ticketing
Airport self-service

Most of these things were capable of moving the profit margin of an airline by a couple of percentage points – with serious financial performance and competitive effects. But it’s hard to see a new thing of quite such scale in the airline industry right now.  Giving crews tablets  is cool – but it won’t be big enough to move the share price of a large airline ( e.g.  “IPads Help Airlines Cast Off Costly Load of Paper In the Cockpit, Navigation Charts Go Digital; American Sees $1.2 Million in Fuel Savings” ).  I have no doubt something really big will arise again for airlines, from some combination of newer technologies: mobile, social, cloud, data science, robotics etc. ( if you know what that thing is – let me know ).

This week we all saw the video from Amazon, suggesting that one day soon battery powered, autonomous octo-copters might bring goods to your door. Others have already had that idea – like the Dominoes pizza “Domicopter“. Perhaps “drone delivery” is a new great endeavor in the making, for a generation of transportation and logistics CIOs.  Reports suggest experiments of some kind have probably been undertaken at UPS and FedEx. From such ripples, massive industry progress waves arise – as we are seeing with the arrival of e-cigarettes in the “tobacco” industry.

At this time of year I am busy co-writing our annual CIO resolutions report and analyzing the early data returned from our new annual CEO survey.  It made me think about the relationship between the two roles and what kind of tech gift might inspire a bigger conversation in 2014.   Here are some ideas that I came up with – what others would you add?

For the transportation and logistics CEO – a drone.

After the Amazon “Prime Air” PR – it just has to be a drone doesn’t it?  Playing with one might help a business leader get a better sense for the idea. There’s the easy to use, app controlled, Parrot AR Drone.  Or you might splash out on something more professional – there are now plenty of quad copters  and octo-copters, offered for use as camera platforms to the TV and movie industries.

For the CPG CEO – a 3D printer

By now everyone has seen this technology in the press or on TV, but maybe your CEO hasn’t experienced one in action, up close.  The power of what a cheap consumer 3D printer can do is awesome – so it’s a bit like introducing a 1979 CEO to the Apple II microcomputer.  Pick one from the may consumer 3D printers but also point him to the Porsche website , where he or she can download a file and print out a Caymen S model as a starter project.

For the fashion industry CEO – a connected smart watch

Wearables are definitely going mainstream and the first smart-watches are already out there.  Are they too ugly? Do they do anything useful?   Can you start carrying your phone in a less accessible, hidden pocket now?  It’s just one of those things I expect you have to wear for a few days to get a true opinion on.  There are plenty to choose from –  browse smart watch news

For the Insurance Industry CEO  - Oakley Airwave ski Goggles

The internet of things is coming. It doesn’t just change the game for product companies – it creates many “business moments” of opportunity.   These ski goggles connect to an iPhone, track your skiing movements and relay them into a head mounted display.  There’s a multi-button wrist controller to connect the two devices. Imagine the moment of adrenaline and fear, staring down an almost-too-hard off piste run. Now – shouldn’t an insurer’s logo be on one of those controller buttons?

For any information-based  industry CEO – a very large UHD (4K) TV

You’ve got data – BIG data – but maybe it’s not being properly exploited. It’s an unseen asset. Why not generate some killer art-style data visualizations and pop them on a memory stick and show them on one of these fantastic screens, mounted on the wall  in your CEO’s office waiting lounge area.  8,294,400 pixels, sure can display a lot of data-points.

For a health industry CEO – a gift basket of different personal health sensor devices

There are so many personal and wearable smart health sensors these days – for weight, pulse ox, cardiac rhythm, blood pressure, glucose, physical activity etc.  Many integrate with smartphones to help people gamify and change their personal health habits. Make sure your CEO is fully aware of progress.

Wednesday January 15th 2014 was a classic dull, grey, wet day across the UK – as seen from my airplane window, on a day trip from London to Glasgow. The flights gave me the luxury of time to properly read a proper, high quality broadsheet newspaper: the Financial Times.  The FT has a major section every day called ‘companies’ where its writers provide analysis of what’s going on in the corporate world.  Here’s an interesting thing:  11 of the 34 articles, had at their core, the issue of IT and digital change to business models, industries and markets.

Here are some of the issues:

• The emergence of  ”Zapp”- a smartphone app payment system, being built by Vocalink – an entity created by a consortium of 18 UK banks.  Zapp hopes to fend off threats from other players in this hotly contested area of future banking.
• The news that one of those potential players – Square – is valued at around $5Bn, after some shares were privately traded.
• Private equity partner firms considering the IPO of an online travel company they have stitched together from multiple acquisitions – including “Opodo” – a company originally founded by a consortium of European airlines during the dot com boom.
• Alan Mulally – CEO of Ford, reported saying that “personal mobility” is at the center of the company’s strategy thinking. In the industrialized world, young people are becoming far less interested in driving and car ownership. That is in part because the internet, mobile and social give them such freedom of personal interaction without movement.
  It is also because electric, self driving and digital media service vehicles will fundamentally transform our relationship to cars, and thus the selling propositions for them.
• ASOS, the highly successful UK based but internationally operating online-only fashion retailer, announced revenue growth of 37% in just 4 months.
• But Debenhams – a major traditional UK department store had a poor Christmas holiday season – with financial and retail sector analysts remarking that it may be “behind the curve” with its online offering.

January 15th wasn’t a special day. You can expect to see more and more of this kind of industry change and disruption news, as the era of digital business heats up. Tech-related structural change is set to be a major topic of boardroom conversation this year and next. CIO’s should make sure they are well informed, broad thinking and ready to give a business strategy opinion – if they are invited into the conversation.

Recently I returned to one of my amateur hobby projects: data visualization.  The dataset from all of Gartner’s published hype cycle reports, is a good size to play with. There are over 2000 technology profiles, tracked and updated by Gartner analysts early in the second half of every year.  If you can show all that data on screen at the same time, some patterns jump out.  There are at least three major observations I can see in the 2013 data:

The technology pipeline is full.
All the way back to the trigger point on the left side of the curve, our analysts are tracking many new technologies. There is no sign that the information technology world is running out of innovation (sorry Tyler Cowan – I’m just not seeing a great stagnation here)

The technology flow is fairly even
I have been tracking our hype cycles for many years. There are times when some parts of the cycle get a bit thin, while others are fuller. That tends to create slowdowns and speed-ups in pressure on companies to adopt new things. Right now it would appear that the flow is fairly constant, whether you are an early, mainstream or late adopter.

Very few technologies die
We often point out that after the hype, few technologies really die. It is true that many emerge from the trough of disillusionment only to find narrow, niche markets.  That may disappoint fans and investors who got overexcited early on.  But nearly every technology eventually finds some use. (Note: the hype cycles track technologies, not individual products or companies). On the chart below you can see this observation as a lack of red bubbles  - where our analysts are calling “obsolete before plateau” .

This week I have noticed two new major Chief Data Officer (CDO) appointments, showing that this C-suite trend is continuing to progress steadily. We do not believe it’s a fad. As enterprises slowly recognize the centrality of information to their business strategies and the need to manage it as an asset, the requirement for active, executive level management becomes obvious.

• One of America’s biggest banks, Wells Fargo, appointed Mr. A. Charles Thomas as its CDO – an action significant enough to warrant a short article by Wall Street Journal technology editor Michael Hickens.   This CDO reports to the bank’s CIO.
• The City of San Francisco revealed that Ms. Joy Bonaguro has started work as its CDO.   Aptly for this digital age, the news came via  a tweet from its CIO.

Several trends are confirmed by these appointments:

- Most CDO appointments are in the United States. It does happen in Europe and elsewhere, but its still heavily US dominated.

- The top two industries creating true CDO roles are banking and government.

- Women are highly visible in this role. About a quarter of CDOs so far, are female. That’s double the percentage in the CIO population.

However one trend is being challenged. Up to now, we have noticed nearly all the CDOs in the US are on the East Coast – and mostly within three cities: New York, Washington DC and Boston.   These two major appointments are both located in San Francisco.  It appears that the #1 tech state is starting to get the CDO idea too.

Is your organisation considering creating a true (C-level of thereabouts) chief data officer role? We have been tracking this for a couple of years. We have a detailed job description template and other useful research reports to help you get the rationale and the scoping right first time.

My conversations with Gartner clients over the last few months have usually centered, one way or another, on the big shift to digital business and how to organize for it. The interactions are usually with C-level business and technology leaders and their senior management reports, in conventional companies that are trying to become more digitally engaged and progressive, quickly.

Often, the inevitably middle aged senior leaders quickly reach for the solution of bringing more young people into the mix to help drive change. They have learned and they often repeat the term digital native.  ”we need more digital natives – those younger people who were brought up with this stuff” – someone says, then everyone nods. Hmmm, is it really that easy to solve your problem? Haven’t we heard that story before?

The term digital native was coined by Marc Prensky in 2001. So it’s a thought from the height of the original dot com boom. In fact he was using it to refer to the problem teachers were facing in schools, trying to teach kids who were exposed to modern technology and whose thinking and learning patterns, and expectations, were changing. At that time the issue was the PC web – which was only a few years old.

However, 2014 is the 25th anniversary of the invention of the web.  Those middle aged business leaders have been using it personally for something like 15 to 20 years. I’m 51 – but I find it hard to remember quite what an average working day was like pre-Google, let alone pre internet email.   When I travel, I see many baby-boomer senior business leaders in airport lounges – plugging in their tablets, and checking their smartphone apps. In those same airports I see them thumbing Wired magazine and lusting after the coolest digital gadgets like Sonos home sound systems, Tesla cars and Oakely Airwave augmented reality ski goggles.  Those items are not cheap – so that older age group must be  the biggest part  of the target demographic. Those travelers then go home via their Uber pickup, to their middle aged spouses who tell them all about what friends and family are saying on Facebook, while flicking through tonight’s viewing options on Netflix and browsing Twitter. They’ve adopted an awful lot of stuff into their every day lives in the last 5 years – for such clumsy, bumbling old-timers – don’t you think?

Being far too old to be a Presnky cohort digital native, didn’t stop Steve Jobs (born 1955) and Johnathan Ive (born 1967) from creating the iPad or iPhone you might be holding in your hand right now. So why would you, as a powerful middle aged senior leader, believe that “only the kids” can move this stuff forward in your company?  It seems to me there’s a fine line between belief in youth as a powerful and distinctive enabler, and just trying to shove the issue away from your own personal set of responsibilities because you want to wriggle out of it.

Yes, there are some new digital things out there that only the young people are experienced in – because those things were designed specifically for them. Grown ups don’t use Snapchat much. On the other hand, the global professional recruitment industry is being disrupted by LinkedIn – and that was never built for kids ( it was created by by Reid Hoffman – born 1967 ).  Even if you think that significant digital innovation only originates with very young professionals in the first few years of their careers – their inspiration needs a lot of support and deep, deep understanding from older leaders, to help it thrive. Eric Schmidt of Google was born in 1955.  Jeffrey Immelt, who is making a huge bet on the “industrial internet” at GE, was born in 1956 – and I doubt the engineers building it for him are all fresh-out-of-college twenty-somethings.

Digital technology is now a deep and pervasive part of the lives of almost all age groups in society.  As a leader you have to own your share of the responsibility for moving the agenda forward in your company.  Too many people are saying “digital natives” as part of a  smart-sounding sound bite, that is actually masking an an intent to do little about the digital change themselves.

Here’s my bottom line. The term digital native was very powerful in its time, but if its primary use these days is as an excuse for middle-aged, middle-management inaction – maybe its time we retired it.

Last week we published the Gartner CEO and senior business executive survey.  This is an annual global survey of over 400 of the most senior business executives at large companies. The findings are quite rich and detailed. Gartner clients can read the main report here.  When I’m asked to net out some of the top findings for this year, I point to three things:

• Growth is a very high priority for CEOs – rising vs costs again year over year, showing the strength of business leader confidence to go out and win new customers and revenue.
• CEO mentions of IT related matters as a business priority, are at the highest level we have seen for over a decade
• But CEO understanding of digital business, is lagging.

CEOs now see technology – especially in the context of the D word: ‘digital’ as an important way to win growth, as economies rise again. CEOs are keen on investing in IT and digital, but we also see a risk that they will direct the investment mostly towards older ideas and a market lagging agenda. By old, I mean things that could have been in an “e-business” strategy circa 2004.

Capabilities like e-commerce and online marketing have now become mainstream and many companies  find themselves needing to catch up. They have done a bit of both for years – but only now are they taking those capabilities seriously, as the main way to get the fastest part of business growth.  Beyond that, copying the web experience into a coupe of  mobile apps to spice things up, isn’t going to take them to the next level.

CEOs should be starting work on the next set of major disruptions too, because technology is accelerating. Some CEOs will scrabble hard to catch up the 8 to 10 year gap they left open, between when the last major tech enabled business idea arrived in their industry and when it really started to bite.  However, they might only get 3 to 5 years until the next major shift  hits their markets hard  - and that clock has already started counting down.

Our survey found that less than a quarter of CEOs  appreciate what digital business is really starting to mean – as a world of mobile enabled, smart products emerges to form the internet of things. They must start pursuing  that agenda now. If they are still catching up with the old e-business stuff, it’s going to be a hard ride.

Recently I have been developing the keynote for Gartner’s annual “CRM” Summit event in London. I place CRM in quotes because though this event has been running many years  - it isn’t actually called that any more. It is called the Gartner Customer Strategies & Technologies Summit.  Personally, I like that title because for many people the term CRM connotes only one stage in a longer technological journey that marketing is on.  At the event, I’ll be introducing some of Gartner’s thinking about Digital Business and how it applies in the context of customers and marketing. Gartner now defines digital business as:

The creation of new business designs by blurring the digital and physical worlds.

That points to another massive wave of creative change, coming to those who work at the interface between technology and marketing.

I’m old enough to feel nostalgia when I watch Mad Men. When I joined the workforce in the mid 1980s, the marketing leaders I met were raised with the thoughts and ideas of the swaggering big brand advertisers of the 1970s. It was all about TV and bigger was better. Hiring movie directors and spending more than anyone before, was the way to win. Here’s an example. But in those days, the intersection between information technology and marketing, amounted to not much more than a couple of Apple Mac computers, used to review print ad graphics from the agencies.

Then came two massive waves of technological change to marketing.  First, in the 1990s came CRM, which emerged because technology advances made it possible to store and analyse all of a customer’s transactions in large databases, drive conversations via direct mailing and call center technology and actively manage aspects like loyalty, customer lifetime value, cross selling and up selling. Second, in the 2000s came digital multi-channel marketing. The explosion of the web and email as interaction mediums, then supplemented by social and mobile – have given marketers a dazzling array of possibilities. There is still a huge amount of new innovation and value to come from those opportunities, but the next major wave is already here and it won’t wait.

The internet of things is upon us. It isn’t the future anymore. These products already exist:

• A capsule coffee machine that automatically sends its status to service engineers.
• A tennis racquet that measures every hit and transmits the data to a tablet app.
• A car with an app that allows you to ‘precondition’ it remotely before you get in.
• A set of bathroom scales that can  tweet your weight.
• An electronic cigarette that can detect others vaping the same brand in the vicinity.
• Ski goggles that can show you where you buddies are on the slope.

Most of these things are sold by big brand companies you know, not just experimental start-ups. The richness of interaction and understanding that marketers will gain, from products that report on their state as they are used and consumed in the physical world, will be like nothing we have seen before. Today, Netflix can know precisely when people switch from viewing a program on TV to viewing on Tablet. Your company can know how long it takes between when a web page loads and when people first click  on it.  But those are things happening in the weightless, virtual information world. Soon, that kind of primary data understanding will come to the world we touch and hold and carry and sit on and kick. Marketers will understand how people live in enormous detail, discover new unmet needs and learn how to serve those needs better than ever before.

Once more, marketing as a discipline will be completely revolutionized by a new wave of information technology – this time from sensor and actuator enabled, wirelessly connected smart physical products. It is going to be quite a ride.

We have just about completed our collection of published research from the 2014 survey. Clients can find the various reports full of analysis and actionable advice, via this ‘top view’ report  

Here are a few headline data points, to spark your business and technology thinking.

Last week, I went out and bought a new camera for myself. I’m a frugal kind of guy – this doesn’t happen often. Once a decade really.   I knew what I wanted, did my homework and I was very pleased with my purchase.  This episode provided strong examples of at least 4 major issues going on in digital business strategy today.

1) The end of the camera shop

I’m old school – I wanted to talk to a camera guy in camera store. For me that’s part of the enjoyable shopping experience.  I found one – and the service was great, but of course there aren’t many camera shops anymore – even in London.  In 2013 the last major UK chain shut its 137 stores  (the brand name was bought from the liquidator and a handful of new stores were opened).  The power of e-commerce to replace most of the physical stores in some categories of goods, is most visible in electronics and white goods.  Its not all bad news. This year AO.com (appliances online) floated on the stockmarket  (“IPOed”) valuing it a £1.3Bn. This is the creative destruction effect of e-commerce, or e-business.

But e-business is not digital business. That’s the confusion. These e-commerce retail disruption effects are not new – they started over 15 years ago.  Gartner defines digital business as: The creation of new business designs by blurring the digital and physical worlds. That physical aspect manifests itself in the digitalization of products as they become part of the internet of things.

 2) A digital product can be digitalized more

My old camera was a digital camera. So in some ways, my purchase was not a transition from the analogue to the digital product world – that already happened. But my previous camera was an SLR. It had a digital sensor rather than film – but it retained the old analogue method of looking directly through the image lens to frame my shots. That old method was a mirror, allowing my eye to see down the barrel of the lens until the last moment before the shutter opens. The mirror is then mechanically flipped up out of the way – allowing the light to fall on the sensor or film.  My new camera replaces that with an entirely digital alternative. The eyepiece contains a tiny, high resolution screen and the image from the sensor is continuously sent to it. I frame my shots just the same as an SLR – but the mirror has gone. Consequently – the whole camera is smaller and considerably lighter – even though it retains all the manual controls and interchangeable lens options you expect from an SLR system.

3) Digital products use smartphones as remote controls

My new camera can connect to an app via WiFi. I can use the app on my phone or tablet.  The app controls the camera. I can focus, zoom and shoot remotely from the phone or tablet. I can view images and send them on. The utility of the product is improved – but the camera maker does not have to provide a physical remote control device. The app is a free download to the consumer. More value, same price!  This idea is gaining ground in other categories. For example BMW offers an app that can ‘precondition’ your car – you use to it remotely start the aircon or heating, a while before you get in.

4) Digital products cry out for digital services – but, manufacturing companies struggle.

My camera is fantastic. It does lovely computational effects like “HDR“. The app remote control is cool. I have duly registered the camera with the makers website, for my extended warranty – but  there ends the relationship and probably, there ends the revenue stream.

Oh they might sell me one more lens, or a spare battery I guess.  But through the whole highly enjoyable un-boxing and registering process – not once did the camera maker suggest where I might store my photographs, or what services could be applied to them.   Maybe I’ll store the images with Apple, or Dropbox or Flickr  - why does the camera maker not seem to care?   I like the in camera HDR and I’m hooked – but its not the best possible. The camera’s little processor can never compare to the compute power of the cloud.  I want more advanced effects – I’d even pay a small fee to post process some images. How much would I pay? 5 us cents per image certainly; 25 – maybe.  I want to show off my new photos and to tell everyone how pleased I am with my new camera – yet the manufacturer provides no place for me to help celebrate and advocate.

Makers of products must learn to create and manage ongoing services that help the customer get value and add value through the usage life of the thing. If they don’t others will. Those others have the opportunity to control the bulk of the customer value experience over the useful life of the product. That gives them more mind-share and in the end they will use that to gain value chain control over the industry.

P.S.  We are often more obsessed with the technology, than the value it brings. That value is in information. So the question you want might to ask me – “what camera do you have?” is unimportant. Here’s the answer to the better question – “what kind of pictures can you get?”. The images are information and information is value. They will be around long after the camera model is a forgotten historical footnote.

Nobody is a digital business laggard yet. True digital business as Gartner sees it, involves blurring the physical and virtual worlds in ways that have only recently started to become possible as a result of mobile, cloud and the internet of things.  So why take the risk of being an early mover?  The answer is because it will be a long, hard and complex move into a new world, with different core competencies. It’s not just a matter of installing technology You must develop new culture, method and capabilities. These things take time to evolve and instill. They are hard to copy quickly. Its a marathon race, not a sprint.

To understand the risks and costs of being late, you have to look back a decade of more. Examine the companies that could have, or should have acted more aggressively on prior waves of internet enabled change such as e-business and digital marketing. Here you find out what the pain of playing catch-up can look like. Three examples have caught my eye lately. In each case you can’t blame the current executive teams and boards of directors alone. It has taken 10 years or more of relative sloth to leave the companies struggling to catch up.

Marks & Spencer – in its last quarterly results, admitted “our new M&S.com site will take four to six months to settle in and, as a consequence, will have some impact on General Merchandise performance”.  They have a new platform to replace a previous 7 year dependency on Amazon’s.  As their head of e-commerce said when they decided to end the partnership: “We’ve been renting the car rather than owning it”. Quite. She might also have said – its too much of a strategic risk to be dependent on such a powerful competitor.  M&S moved onto Amazon in the first place because the M&S platform before that was under-invested and did not meet the kind of customer promise expected of a firm in their league.  From about 1996 to 2004 M&S leadership simply did not take e-commerce seriously enough. They could have, after all – Tesco did.

Lesson:  what you do NOW in the early years of (physical) digital business matters more than you know. If you procrastinate, you are setting up deep problems later on. The market experiments, learning and capability development you need to do are not expensive or risky – compared to the long term health effects of inaction

Bed Bath & Beyond has also had to share bad news in its latest quarterly results, with revenues below last years, below analyst expectations and sub par for its sector. Financial analysts have pointed to its relative weakness online as a key factor in its performance. An article on influential consumer financial investor Motley Fool sums it up thus: “its online channel is woefully inadequate according to some analysts, while Restoration Hardware’s online sales, for example, are booming. Despite investments in this channel, there isn’t much notable improvement to be seen.”  

Lesson:  ignoring your industry peers is a mistake. Maybe all of you ignored the trend at first, but once some of the others get going you must move with the pace setters. That’s because you can’t catch up quickly later just by throwing money at the problem. Its not just a matter of tech investment.  Hearts and minds must be won and shifted. Processes and organisation structure must change. New methods and driving metrics must be created and believed in. Ideas like the end of the bricks and mortar ‘space race’ take a long time to seep into the consciousness and actions of all the line managers in a large organisation.

Morrisons  sold its Kiddicare business for just £2m,  writing off £163m of value in the online baby products business it acquired only 3 years ago. Morrisons now has a tie-in with online only grocery retailer Occado to help provide its e-commerce capability.

Lesson:  you can’t catch up by just acquiring your way into new capabilities. Often the acquisitions will be a poor fit or will fall apart in your hands.

These lessons all hark back to the dot com / e-business era. Some management teams back then, didn’t take the industry transformation power of information technology seriously. They under invested, or did so only half heatedly for PR effect (and then often pulled back quietly).   We are now facing another great wave of change, and quite probably a bigger one. This time it applies to many more industries, not just the consumer facing ones. This time it impacts the products you make and serve, not just the way you sell them

Today’s digital business strategists must raise examples like these with executive teams and ensure they learn the lessons of  e-business history.

Some news items from this year,  so far:

• Google announces cars  that will one day drive themselves.
• Amazon gets serious about drone delivery experiments
• Google partners with Luxottica to develop AR eyewear.
• Amazon studios commissions more original TV series
• Novartis licences diabetes sensing contact lenses from Google.

From movie making to medical devices and from mobile payment systems to cars, Google and Amazon seem to be very comfortably entering multiple industry sectors.  This isn’t IT service support like you are use to getting from your favorite old school technology provider. In many cases its potentially the thin end of a very dangerous wedge. What might the thick end look like?  Well how about product reinvention, business model change, IP control, core competency substitution, repricing, and distribution platform control.

This is part of a process I have been referring to in my research as the digital ‘remastery’ of industries – where products and services are fundamentally re-engineered for the digital age. The shocking thing is how easy it seems to be for these new outsiders to enter so many sectors and reinvent their products. I now believe that no industry is truly safe from this. So shouldn’t some business leaders be just a little more shocked, embarrassed and reactive?

Imagine I’m a Warren Buffet style long term investor and you are the CEO of a company that claims to “lead its industry”, or aspire to, as so many do.   Can you really convince me you are in control of your destiny, if companies like Google or Apple are busy reinventing the  future of your service or product?  For sure – partnering with them might help you learn and stave off the problems for a while.  That’s what Marks and Spencer did, using Amazon as its retail e-commerce platform provider for 7 years. But in the end, your industry is your business. Whatever core is, you must be master of it. That new competency might be what you need to remaster your own industry. The question you should ponder is this: why isn’t it evolving from within your own R&D and innovation capacity – and when will you fix that?

The Internet of Things is a curious name for what happens when objects other than computers, start to become electronically networked. With this capability we might take sensor data from them, to monitor our world and optimise things more effectively.  We might be able to control objects remotely from afar.  We might might send software updates to objects in order to upgrade their performance or add new functions.

To call this wonderful new world an Internet of Things is entirely accurate. It helps us discriminate a phase of innovation that is genuinely new, from that which has already happened. First we had an internet of connected computers – our PCs, laptops and servers. Then, via technologies like Smartphones, Facebook and Twitter we created an internet of connected people.  Now, because of Moore’s law and its continuing miniaturising and cost reducing effects, we can start to embed processing power, memory and connection directly into everyday things. What things?  Cars, wind turbines, tennis raquets, lamp posts, trash bins, dresses.. the list of things being connected is in fact endless.

Though the term Internet of Things is accurate, it is rather detached and it omits a key ingredient: a sense of ownership.   It makes it sound as if this will all just happen, as a result of some exogenous force. However there is no Fairy of the Silicon Valley,  flitting around the world with her  magic wand connecting things. It won’t happen unless we make it happen. Technologits have made it possible, but you have to make it happen. Becuase every single thing, in the internet of things – is some company’s product. The CEO of that company must decide when the time is right to start connecting his or her products, then create the capability to do so.

For now, the market has decided it likes the term Internet of Things, so that is what we all be reading about and saying for the next couple of years.  However, when you hear those words, make a point to correct them in your mind. It is an internet of products.  Doing that, will gently remind you there is an action point  pending on your strategy ‘to do’ list.  Sooner or later it will need to be an internet of your products too.

My son is currently reading “Being Digital” by Nicholas Negroponte. He’s already impressed by how well it predicted the digital disruption of the media and music industries. But that is now a very old story (the book was published in 1995) and it’s a story mostly limited to things that were always inherently information goods. News is data – bits not atoms. A more recent and  tangible business history example – the disruption to Kodak and the other old chemical photography kings – has already been analysed to death.  Mention it and people’s eyes glaze over. The problem is that old stories of disruption are easily ignored or marginalized. That doesn’t help you get your people alter, thinking and acting.

So If you are trying to understand and explain what the future of digital business disruption might look like for your own industry – where should you look for examples?  There are several good ones, but my current  top recommendation is that you keep a close eye the tobacco industry. It’s an example that is providing a great deal of learning opportunity as it gets disrupted at astonishing speed.

Here are 7 key learning points so far. Over the next few blog posts, I’ll expand each one.

1)  A physical goods industry can be digitally disrupted.
If it can happen to tobacco – it can happen to anything

2) Product digitalization can be hard to believe and easy to deny and ignore.
It’s just an ‘electronic’ cigarette right? So where’s the digital?

3) Digitalization can progress at breakneck speed by sidestepping regulation.
Evading existing regulation, at least for a while, is turning out to be one of the biggest strategic plays in digital business disruptions.

4) Digitalization can kill an existing industry model within a decade.
The growth rate of e-cigarettes is huge; the tobacco cigarette is flat. The forward projection is easily calculated.

5) Disruption can come absolutely anywhere. Adaptability beats prescience.
The e-cigarette arrived suddenly, from China. What matters most is how existing tobacco companies react – not whether they predicted it.

6) Disruption creates great opportunities for incumbents, not just the entrants.
For example, the tobacco companies can use e-cigarettes to reinvent distribution channels, revenue models and customer relationships.

7)  Existing old industry players can end up winning  if they move smart and learn fast.
Book publishers didn’t learn from the iTunes case, so they got ‘Kindled’. The tobacco industry isn’t making the same mistake.

Recently I was interviewing a couple of digital leaders about what drives them and what digital means. They mentioned several things that separate digital from IT but one surprised me. It was a sense that the current, ageing generation of CIOs still don’t really “get” the web. The old client-server guys never adapted to internet thinking but they are still occupying the CIO seats..   that was the accusation.

I was quite taken aback by this. The divide they point to was certainly very visible in the dot com / e-business era of the early 2000s – but it’s a sorry state of affairs if it still persists over a decade later. Indeed the digital leaders  raising  this with me are not so young themselves now- more Gen X, in their 40s – certainly not Zuckerberg contemporaries ( full disclosure:  this analyst is 52 – at the tail end of the baby boomers ).  I know plenty of CIOs who have moved on, but I do agree – some seem stuck with a repetitive playbook developed in the late 1990s and narrow perspective on what kind of IT matters.

I have never believed there’s a good excuse for technology professionals to get stuck on a particular generation of technology thinking.  We would not tolerate an old but still practicing medical doctor using outdated harmful techniques on us would we?  So why should we be comfortable with CIOs applying outdated concepts that might damage our enterprises? If you are a CIO, you have chosen to be a leader in one of the fastest advancing areas of human endeavor.  Keeping up is a professional obligation. Becoming a stick-in-the-mud is not really acceptable.

IT isn’t athletic. Muscles degrade, but our minds remain sharp well into retirement. There’s no fundamental reason why you should not keep up with the latest thinking and methods. So do cloud, do social, do mobile apps, do startup science, do data science. You can get up to speed with these things. You have the capability to reshape and redefine organisational capabilities. You have the power to block requests for incremental, low business value return changes to old systems – that end up consuming all your budget. That’s why you are the designated leader. If you don’t have time, then delegate more. Nobody is stopping you. It’s all about your choices.

If you are a tail-end baby boomer  – don’t be the CIO who held on to his preferred old way of doing things for too long and ended up strategically limiting of even damaging his firm, as the last act of his career. It’s time to do digital business full force; get with the program or get out of the way.

Recently I took a photo of Copenhagen airport on a beautiful sunny morning, shortly after take-off. I used my phone of course.  When I landed and the device connected again, that photo joined all my others in the Apple iCloud. My music also lives there. My ebooks could live there, but they reside with Amazon. There is some natural clustering of entertainment and media. I am happy for those things to live with Amazon or Apple.  However I have also started generating other kinds of data and that lives elsewhere.

My calorie tracking data lives with some company called MyFitnessPal. My cycling data lives with another app provider. This kind of data is all related to personal health – some people call it ‘quantified self’. But what if I were an e-cigarette user and that device started connecting? What if my home capsule coffee maker starts connecting?  Is that quantified self or some other category?  If my car connects and starts saving all my driving  journey data, should that join my walking data or is it separate? In Denmark, all citizens have a government email inbox where they get messages about government services, taxes, social payments, speeding tickets and the like. But is that the way people will always want it – in one place because it is data from government, rather than in some other thematic space?

It’s not yet clear how many separate cloud or cloud-like places consumers will want to hold their data in, or what the natural theme boundaries will be. A race is on – many places will bubble up. Over time they will aggregate. Our initial ideas about the likely categories will probably be wrong. The natural categories and boundaries might vary by country, culture and other segmentation features. Those who make fairly good early bets now, then learn to pivot quickly, will end up controlling the big cloud places consumers trust. They will have huge market power in decades to come.

Last week I attended Gartner’s annual Symposium in Cape Town. It’s always one of the most enjoyable events on our global circuit. The thoughtfulness and positive energy of South African IT leaders is inspiring, as they continue their journey to forge the systems of an emerging great nation.

This year it was interesting to note a few chief digital officer business cards starting to appear.  It’s a trickle not a flood but it shows that this new job role is now reaching all corners of the earth.  These few were not just digital marketers. They were the more strategic kind of CDO – looking at the whole of the firm and where digital shifts can make the most difference.

Digital business was of course the main subject of the conference. We had many intense conversations with CIOs about what digital really means in practice and how they should adapt.  A change of title is certainly not always needed – it’s more a change of perspective and posture. I have no doubt that the most successful CIOs and CDOs of the future will be creating the business technology agenda of their organisations, not just servicing it.

Recently, some suspicious cell phone towers were discovered in the United States.  It is believed they are spy towers – listening in on calls and or tracking people. It’s not known who put them there. At the same time, in Australia, Russia, the UK, India, South Africa and many other countries – innovators are working as fast as they can to develop delivery and other drones.  If you are in an airport right now, there’s a chance it is tracking your movement via your WiFi device, as Copenhagen does. If you are in the vicinity of a person vaping on an electronic cigarette, there’s a chance it’s trying to contact others nearby.  This is the world of connected, smart and powerful things.

Cars are also becoming part of that connected world. One day they will be doing limited self-driving – for example parking themselves without a driver. They are supposed to be very safe and incapable of running a person over – but how comfortable will we feel about them? (I’ve read that book Robopocalyse)  Of course all of these things will be valuable to us, but sometimes they will go wrong. When they do, we will want to know who is liable for any damage they cause. We will want to know who abandoned them – if they end up as rubbish on our streets. We will want to know who they belong to if they start to re-order their own supplies – as agricultural robots might.  In general – I don’t think we will accept an urban or rural environment full of smart connected devices buzzing around if they are anonymous.

Every significant object on the internet of things will be some company’s product.  Either that company will be liable and accountable for what it does, or the customer who bought it will be. Either way, any insurer will want an unambiguous record of to whom the thing currently belongs.  So I’m thinking some kind of digital certificate and ownership register probably needs to evolve.   Developing that system of registration and tracking might be a golden commercial opportunity for someone.

Yesterday, the CEO of Air France KLM  tried to end a very damaging labour dispute with these words :

“With the withdrawal of the Transavia Europe project, there is now no reason to strike because there are no longer any concerns about relocation.”

If you are a large company CEO, business strategist, business strategic CIO or chief digital officer this should make you shudder. The Air France pilots strike grounded half the firms flights and cost 15 million Euros per day.  The project he mentions “Transavia” is a low cost airline. Simplifying a lot – Air France was trying to grow the Transavia model while allowing the old core model to gradually shrink.  Its one of the hardest strategy manouevres any CEO can attempt – to progressively switch over from one business model to another gracefully. There is often a risk of schism.

This year I published a report with the title “every industry will be digitally remastered”. It explains why the process of disruptive change that happened to music, books and photography will now extend to all sectors. With that kind of thinking in view, I am regularly encountering companies that are hiring chief digital officers and  empowering them to set up digital development centers in which they will reinvent not only the business model but some of the the core products or services that the firm provides. It’s an easy journey to start, but a very hard one to complete.

The low cost airlines were a business model innovation of the 1990s. In many geographic markets, such as the UK and US, start-ups challenged incumbents and those incumbents had to adapt or die. There were scary moments for many airline CEOs in the early to mid 2000’s but the internal transition story is now mostly done.  Often airline majors had to create their own challenger brand operations ( do you remember United’s “TED”, Delta’s “Song” or British Airways “Go” ? ). At the outset the crucial question is whether such new model operations are intended to be the change or whether they will catalyze the change in the core business and then fold. The strategist must of course ensure the intent is never too obvious.

All the shiny digital business innovation centers being set up this year and next, if successful, will ultimately lead to the kind of dilemma Air France has been facing in recent weeks. Hopefully not all of the transitions will result in such industrial strife. But strategists should think very hard about the design of the new vehicle and the limits of its separation from the corporate core. If it’s too far removed, it will be deemed non-core and investors will call for it to be sold as soon as it makes money – thus having no net change effect. If it’s held too close it will be killed off by the powerful vested interests of the old core. Goldilocks design is needed. Think about that, before you decide to push your digital innovation off to California, hundreds of miles from the old political power center of your firm.

Recently, I was using a gym in a hotel I visit once a year. The management had replaced all the fitness machines and I was keen to discover what the latest equipment can do.  There was better integrated TV, touch screen controls, and some local gamification – showing me my performance stats compared to other users over the last day. There were also lots of Facebook and Twitter logos trying to get me to be social with my gym stats.  Another thing was new this year – a kind of fitness machine I had never seen anywhere before.

The new machine was a variation on a cross-trainer – the one where you stride purposefully, as if using ski poles. But this machine had footplates at strange angles. When I got on it, the action was one of twisting from the hip at the same time as striding forward. Interesting indeed. I’m sure the company that makes the machine would love me to start tweeting about it and discussing it with you but there is a big problem. That machine had no name.  Screens full of mostly useless social logo clutter, but no name. Not printed on it, not on screen.

I discussed this with a colleague and we tried to think up names for it. She came up with one based on the movement.  I won’t repeat it here – it sounds similar to wincing, which is what I might have been doing if I had stayed on it very long.   But why would we try to find a name for it?  Simple – we wanted to tell some of our colleagues about the new machine. That old school process, dear marketers, is called word of mouth recommendation. It’s hard to achieve a good net promoter score if one person cannot promote your machine to another because they don’t know what to call it.

I suspect this is the beginning of a problem we are going to see a lot of in the internet of things world. There will be new kinds of products and in the rush to just get them out there, companies will fail to name them.  That is understandable, time to market counts. What is not forgivable is a CMO who use spends developer time and agency budget on superficial social integration that nobody will use, while failing to get the basics of marketing right.

Pizza drone, vaping device, iWatch – the list of emerging IoT terms is starting to grow. Job #1 for product marketers must be to create strong thing names. Without them we will all be at a loss for words. You cannot sell what we cannot communicate.