I am intrigued when I see a company in a traditional industry, acquire some kind of digital or information technology business. It’s a very modern M&A sub-trend I’ll call  “techquisitioning”. We did not see much of it during the original dot com and e-business boom of the early 2000’s. However, there are many more interesting entities out there to be considered today – some quite mature and ready to pick. Here are some recent examples:

• Capital One acquires user experience consultancy Adaptive Path
• Under Armour Buying MapMyFitness in $150 Million Deal
• Monsanto Buys Weather Big Data Company Climate Corporation
• Wal-Mart acquisition to bring new tech to stores
• Kroger Agrees to Buy Online Vitamin Seller Vitacost
• BBVA buys US digital bank Simple to increase online offering

I think some of the smartest traditional industry business leaders have rather suddenly woken up to the digital threats on the horizon in the post-recession new normal. Companies like Google, Amazon, Facebook and Alibaba have used digital era technology to amass a great deal of market power which they can use to either enter or pressure multiple industries. After a decade of relative under-investment in technology, catching up or leapfrogging isn’t easy for the traditional incumbents. Organic capability development is slow. So sometimes, jump-starting your future by acquiring a technology, online property, platform or talent team might make sense.

Let’s imagine for a moment that this is a good idea and it works (we cannot know yet, it’s too soon to tell). The early movers have started- what are you going to do?  Do you have the management team competency to find and evaluate potential targets? If so, do you have the funds and the investor tolerance to make your own fast follower moves? Finally – could you integrate such delicate and culturally disparate entities without crushing them? These are questions I think many boards of directors will be debating with their CEOs over the next couple of years. CIOs should be ready to help the leadership team develop answers.

Two very different business examples of recent times have started me thinking about the dilemma business leaders face when tying to tell the difference between a strategy that is cleverly shifting to preempt disruption and a strategy that is ‘wandering’ away from core business. Last year I enjoyed frequently quoting this late 2013 remark from Kevin Plank, the CEO of sports clothing maker Underarmour, made in an interview with Forbes:

“We have the hardware with Armour39. People may wonder if we are getting away from our core with this acquisition [because it’s software], but I think it’s important that we’re there. It’s a long term play in the space. There no reason we should just sit around and wait for Google to do this.”

He was talking about the acquisition of MapMyFitness – an online and mobile app that millions of people use to track and store their running, cycling and other fitness data. I’m sure you see why it makes sense. The wearbles area is moving forward very quickly. This year Ralph Lauren Polo say they will market a shirt with respiration and heart rate tracking built into the fibers of the cloth. That makes the shirt an endpoint ‘device’. Then it’s easy to see fitness data as ‘content’ and soon enough you start thinking about the iPod and iTunes history analogy.   If you only have the shirt, but not the data service – maybe you’ll end up being a Sony, not an Apple in a forthcoming industry battle.

However, last week Tesco announced that it is doing something that appears to be opposite to the strategy of Underarmour – it is selling off ‘digital’ assets.  Tesco has long been regarded as a company that is pretty tech savvy. It usually comes in the top 10 of non-tech companies mentioned by CEOs as admired, for the use of digital and information technology for competitive advantage  (paywall source).  Yet Tesco has decided to sell two businesses: Tesco Broadband and Blinkbox (a UK internet TV service, similar to Netflix.). Furthermore, Tesco has said it is considering selling DunHumby, the business that manages and analyses all of its Clubcard customer loyalty program data. Many business news commentators, including the FT  have been referring to these actions as the sale of “non-core” assets. To be sure, Tesco has some very serious business problems to tackle and a substantial financial hole to fill. So it must make some forced and painful choices. However I find it interesting that what is admired by commentators as insightful future digital strategy one year, can be reinterpreted as ‘non-core’ the next. Tesco’s fight against Amazon, Ocado, Netflix and others for consumer wallet in the UK hasn’t suddenly evaporated.

Digital business change is accelerating and your company will likely come to a point when it has to start investing in a new and unusual business direction that doesn’t feel natural or comfortable. E-cigarettes for tobacco companies, wearable devices for Swiss watch companies, drones for helicopter operators … none of it will suddenly feel “core”. As your innovative new strategy follows the inevitable hype cycle, there will be a trough of disillusionment. Make sure you agree upfront, that digital business will be your future ‘core’. It’s not just a fair weather game, for when times are good.  If you don’t believe that – why bother?

P.S. As a long time admirer of Tesco, I wish them a speedy recovery in 2015.

Last year, our CEO survey showed that digital and IT was 4th in chief executives business priorities – up from 11th place in 2013. I have no doubt, this represents the highest visibility for technology among CEOs for over a decade. The key question is – will it persist?  I’m working on our latest CEO survey data right now – to be published in April.  When I have the responses analysed it will provide a good indication.

My best guess at this stage is that Board and CEO attention on digital business related growth ideas will remain high during 2015 but then I suspect it will start to fade.  The current level of intense interest is unlikely to sustain indefinitely. Something else will steal CEO’s focus. However I do not think we will see the kind of sudden fallout and backlash that came after the e-business wave.  For those who remember 2002-2003,  technology spending was cut and board rooms readily accepted Nicholas Carr’s premise that “IT doesn’t matter”.  Instead they turned to BRICS and cheap consumer credit to fuel business growth strategies – leaving the idea of information technology as a primary competitive weapon, on the sidelines for almost a decade.

Right now, its hard to see a bigger strategic growth vector than technology. But business leaders will always take the shortest, easiest path to growth. Technology is quite complex and intimidating to many business leaders. Technologists also have a habit of saying that everything will change and business returns will come quickly – when they won’t.  Already  ideas like drone delivery, 3D printed everything, self-driving cars and intelligent systems are common, water-cooler discussion subjects in business. Yet all of them are at the very least 5 years away – probably much longer, at scale. Mind that gap!  The same thing happened in the late 1990s when technology protagonists (myself included) talked-up the mobile app-like future.. approximately a decade too early.  We get carried away. When we do that, business leaders lose patience and punish us.

Entrepreneurial style information technologists were placed into some kind of corporate “sin bin” between 2003 and 2009  (then the recession took the focus). We have only fully reemerged since 2011/12. Right now we look like we have all the answers for future growth – product innovation, business model innovation and all the rest.  But we could so easily over-reach and fall flat on our faces again – and then CEOs will want to look elsewhere. So far, there hasn’t been a strong alternative growth leading mechanism, like  emerging markets or a credit boom for CEOs to switch to. But it will come sooner or later.  A sustained, low oil price might already be that opportunity for some.

So what should you do?  Behave as if 2015 is the year of peak digital. Make the most of it. The next winter may be a long way off – but don’t waste the sunshine while it lasts.

People as old as me can remember when the internet arrived and when companies created their first websites. Very quickly, it became obvious that some big companies could sell their stuff directly to end customers by electronic commerce, because websites could be developed to become online self-service machines. Orders could be taken, products could be configured and in some cases even parts of the delivery could be completed over the internet. It was true for airline tickets, hotel rooms, car insurance and a raft of other things. This process of applying this new ability to sell directly and cut out the middleman was called disintermediation  by the management thinkers of those early e-business days. Traditional travel agents and insurance brokers lost out, sometimes badly. However, in many industries what quickly happened is that price comparison websites grew up to compare and contrast all of those producers who wanted to go direct to the end customer. New online intermediaries such as Orbitz,com and Moneysupermarket.com inserted themselves between the customer and the provider’s website – a process that was dubbed reintermediation.

The contrast between those two terms got me thinking recently, about another set of changes has been happening as a result of digital progress. Some products have been dematerialised by being remade entirely of bits and conveyed over the internet from the producer to the consumer. This has happened to newspapers, books and music CDs – with paper and plastic material being removed from the product. Now I think we are beginning to see a new trend I call rematerialisation. This is where a product is re-rendered in a different way, in a different form, using different materials, as a result of digital changes – but it remains a physical product. Examples of this are to be found in 3D printed jewelry, electronic cigarettes, Google’s rendition of the car, or the camera drone as a replacement for a helicopter plus video cameraman.  In each case there is still a thing you can touch or hold, it is made of atoms and it serves a similar purpose – but it is utterly different and radically superior in some way because of digital technology.

So if your product or service today, exists in the physical world and its food or transport or something that cannot be fully dematerialized into bits – then you have a new strategy question to ask yourself. How could our product or service be rematerialized  for the digital age?

From time to time CEOs do create new C level roles and titles. Trends break out and copying happens. Some of this is very real and important – but some of it is entirely imagined. In today’s online ‘news’ world, it is perfectly possible for any bright spark to coin a new C-level job title idea speculatively and blog it.  Before you know it, that idea gets repeated and for a while people think the job might be real even if nobody has ever actually held that title.

This week I was struck by two stories, one about a short report on new c-leader titles from the executive search company Spencer Stuart, the other  a minor news report mentioning the idea of a chief IoT officer. The value difference between these, was starkly contrasting.

The Spencer Stuart report is sharp and insightful. It points out that from time to time, new C-leader titles do become necessary.  This makes sense. There were almost no CMOs in the 1950s and no CIOs in the 1970s – these jobs were invented at some point in time; management is an evolving discipline. So we could reasonably believe there might be a few more to come. But as Spencer Stuart point out – there has to be a practical limit to the number of direct reports a CEO can have. They say it has risen over the last couple of decades. All managers know that once they get past about 15, things become unwieldy – particularly if  you need the group to make coherent and disciplined committee decisions. Spencer Stuart point out that some C-leader titles exist for a while, during a period where a big new kind of issue needs to be dealt with. Recent decade examples of this episodic need might be a major regulation or environmental sustainability. Sometimes, new persistent C-leader roles emerge, but they are niche and only a minority of companies adopt them. Chief Customer Officer is an example.

I see 4 types of new C-leader role:

1) Enduring – a role that is needed, as a source of continuing governance in the majority of businesses and will persist for many years or decades.

We place Chief Data Officer in that category, though it will be a long time before the majority of companies has one (currently < 20%).

2) Transitional – a role that is needed in many businesses as a strategic transformation agent, to introduce a new capability, but will disappear within a decade.

We see Chief Digital Officer as mostly in this category, like heads of e-business circa 1998-2003.  However, some might stick.

3) Niche – a persistent or repeating role that is needed, but only by a minority of companies at any one time.

I place Chief Innovation Officer and Chief Strategy Officer  this category.

4) Unicorn – a mythical role that either never existed, or fewer than 10 people ever managed to get it on their business card as a full time job.

I place Chief IoT Officer in this category, at least for now. As I’ve said before, the internet of things is an internet of products – so I believe that responsibility will fall substantially into  product management and other existing areas – it is not a distinct need. But if you want a more evidence-based view why not to believe in the IoT Officer yet – here is it:

Even Chief Fun Officer is more ‘real’ than IoT officer.

A traditional view holds that information technologists generate way too much  jargon. It irritates business people; a source of friction that impedes progress. As an analyst I have certainly seen that problem many times in the past, but it isn’t troubling me these days. I think we have flipped to the exact opposite problem. Technologists are not creating enough of the new technology-related business and management terminology needed for a productive business conversation to advance more quickly.

There’s no doubt we are in a tech boom period and one that is rivaling the dot com boom of the late 90’s to early 2000s.  Consider some of the valuable terms that were added to the management lexicon back then:

• B2C and B2B
• E-commerce
• Business model
• Reintermediation
• Value network
• Freemium
• Longtail
• Open innovation

You have probably used most of those. They allow us to easily and quickly discuss new and better ways of doing business through the application of information technologies.

But today, technological change to business seems to be outrunning our ability to create words to describe it.  For example, I can find no generally accepted term for the business model type operated by Uber and AirBnB, despite their signal importance in boardroom discussions about digital disruption.  Meanwhile, older terms such as “I T” are in all kinds of trouble. These days it seems IT is constrained to meaning only some combination of older back office computing and supporting services. Many other kinds of information technologies and related capabilities are not considered part of IT.  Even when new terms do come along they can be terribly clumsy. The IoT for example – how do we say it out loud to each other? It is so embarrassing, nobody has dared to start saying “eyot” – so instead we have to half swallow it as we quickly spit it out  -“internetofhtings“. This kind of language difficulty is making it difficult to discuss important new issues such as the changing nature of industries.

In the business news world, a ‘tech’ company can be a maker and seller of information technologies such as Cisco or IBM but it is also used to describe Orbitz, Uber, Twitter and Grubhub – none of which make and sell technology. On Bloomberg yesterday, I noticed Sir Martin Sorrell, CEO of WPP repeating his view that Google and Facebook are media companies, not technology companies. We can’t seem to decide. When, one day, Ford or Volvo make and sell their first autonomous cars will they suddenly be re-designated as tech companies? Maybe. If Apple does decide to make cars we can be fairly sure it wont be re-designated an automotive company. Tesla? Nobody can agree whether it is automotive or tech.  The term tech is vague and presumptive anyway. It generally seems to be shorthand for information technology related. There are other kinds of technology in the world, but they don’t get a look in anymore.  Sorry, did I just type information technology? – I didn’t mean to sound like an 80s throwback.  I should have said digital.

There are some bright spots. I very much like the term “data science”.  That’s adding a lot and it seems to be sticking. “Additive manufacturing” is good too ( it’s what manufacturers do with 3D printers).  “Gamification” was another useful addition. We certainly could use more words for the new emerging technology related competencies. Steve Prentice and I were discussing the term  “blockchain” recently. That is a good example of what we need to see more of – a term that abstracts the generic model from the specific cases so that we can discuss, transplant and reapply the idea in other contexts more easily, without getting confused.

Did you ever wish that you could create just one new term that the whole world picks up and uses?  If so, now would be a good time.  We all need your help. Give it a go.

Like many analysts, I have been fascinated by the prospects of aerial drone use in everyday business. My first moment of awakening was seeing the famous UK Dominoes pizzadrone PR experiment video in 2013.  Since that time, whenever I speak with CIOs and business leadership teams of larger companies about it,  I am usually faced by a barrage of problems, complications and reasons why drone use can’t or won’t happen. Each reason is perfectly plausible. Each reason is a brick in a wall of denial. You can’t see though walls and they make you feel safe continuing to do business as usual. Such walls are exactly what enables the kind of disruptive innovation that Clayton Christensen has taught us all about. And yet we still keep on doing it – building walls of denial.

What has been amazing over the last year in particular, is to see how start-ups and entrepreneurs are addressing each and every objection and overcoming them methodically and at lightening speed. It is testament to how rapidly our modern digital economy is building upon itself to accelerate innovation progress. Ideas are shared globally on web videos, money to test ideas is raised on crowd funding sites, components are built on 3D printers, regulation thinking is evolved through social collaboration. These methods combine to rapidly find solutions. For example

“Unmanned, propeller systems landing in back yards are too dangerous” .  Why land at all?  This Russian Pizza copter didn’t. Nor does Google’s delivery drone experiment.

“If they fall on people and property it will cause damage”  Yes – but DJI already has a parachute system to help minimize that. There is no form of transport with zero risk. Risk is relative. Today’s pizza delivery methods sometimes cost lives and big damages .

“People won’t let those things fly over their homes.”   I think that’s probably mostly true. So why not let them just fly mostly over roads?  This new system will register your objection to home overflight. But maybe some people with homes on busy short-cut routes wouldn’t mind being paid. I could imagine that site becoming a toll collecting gateway system one day.

“There is no system of registration for these drones – they are anonymous”.  That’s a problem. I have posted a similar thought before. City AM reported yesterday an entrepreneur who started a famous taxi app, is now trying to solve that with a venture called verifly.com.

“The aviation authorities won’t allow it”.  They will be cautious- for sure. But they will be driven to act quickly by politicians if national economic advantage is at stake. Already countries are vying with each other to liberalize quickly. That’s one reason why Amazon’s drone delivery test facility is in Canada.

There are many other objections. Short range and limited battery life. Precision location finding. Performance in bad weather. Price performance and energy consumption per KG for package delivery – relative to existing modes. Noise. But it seems to me all are addressable to some extent. To anyone who fears drones falling on their heads, I say – stand in London or New York and look up. Why are you not afraid of that enormous jet plane?  Urban culture can shift just as it did to accept planes, cars and driverless rail transit systems.

What will be the first ‘killer app’ category for drone delivery?  I’m not sure it will be pizza. It could be anything. Spare keys to locked out people, emergency blood packs to accident scenes, urgent car parts or maybe flowers…  who knows?  All these examples are being experimented, usually by smaller nimbler businesses that just know how to say “what if…” and try, rather that sit around a big meeting table and think of all the reasons it can’t be done.

Here’s my bottom line. If Ford can believe some autonomous cars will appear on roads within 5 years, it’s hard to imagine why aerial drones won’t find at least a significant niche in delivery services. It is harder still to imagine how anyone can be sure enough to bet against that future. Sure, it will take a few years to perfect. But by then you might not have the capabilities, licences and business relationships to be able to catch up.

Yesterday, 25 June, I experienced the wrath of digital backlash – first hand.  French taxi drivers did everything in their power to disrupt me. Any business person flying into or out of Paris was the target.  It wasn’t just a lack of official taxis – they blockaded the airport from all cars. It wasn’t just the roads – they made sure the RER trains were delayed or cancelled too. There were suspect package alerts on platforms, trespassers on the lines and unmanned ticket offices. French organised labour tactics are intelligent and precise. My easy day trip  from London to Paris, turned into the most complex re-planning and re-routing day I’ve had since the Iceland volcano year. Feelings were running high – as you can see from the questionable-taste reference, in one poster I spotted and hurriedly snapped with my phone.

Discarded taxi driver’s protest poster on the road outside CDG T2

People react strongly when they fear their livelihood is being suddenly threatened and they can’t see an alternative. Uber is causing great change to the way cars and drivers are provided, in cities all over the world. Its methods are fast paced and market disruptive – deliberately so. But such transitions don’t have to be so sharp and antagonistic. It takes an acquiescent set of incumbents to let a disrupter start to run amok in a sector. Markets and workforces can adjust to change much more smoothly and with less pain, if there is progressive planning. That requires existing market leaders act with timeliness and forethought on new technology opportunities – rather than dragging their heels all the way.

Taxi operators in many major cities have dawdled over the last 5 years, when presented with the opportunity to embrace the possibilities of smartphone technology. Experiments have often been only halfheartedly supported. But consumers want convenience, so they will quickly gravitate to the power of location based services and easy payment solutions. Regulators have often been slow to adjust, or to review and act to control new entrant models.  Digital change inaction has been a root problem.

In our modern societies, customers quickly vote for new and better – with their feet, clicks, or touch screen prods. So the cost of sleepy digital inaction, could be major damaging labor disputes in your industry too. Because as we have said before every industry will be digitally remastered. The products and services of your industry will be transformed. If you don’t make it happen – the gap will grow and someone will step in to disrupt it. However, if you act now to start the transition in a smooth and orderly way, your customers and your staff will have the few years they need to adjust with grace. As with all industrial progress – in the end we get better products and services that everyone enjoys – and usually, better jobs too.  It is a choice whether we get there by strife, or by strategy.

A lone anti-uber strike taxi parked outside Paris Gare du Nord – June 25 2015

A recent Wall Street Journal article revealed that three competing car companies have agreed to acquire the digital mapping services of Nokia. The article goes on to suggest that these initial buyers might offer ownership stakes to other major automotive companies. I see this as a good example of a two new kinds of digital business strategy behavior that all companies and industries must consider more often.

Why might the three companies have decided to do this? Firstly because mapping is a key digital technology component of all future connected vehicle and autonomous mobility scenarios. Secondly because car companies need to accelerate their actions in developing their digital automotive futures. Third because if they don’t  gain control over the most important parts of the future platforms for their industry – someone else will.

The two key behaviors in this example are

Techquisition – a new strategy habit that traditional industry companies need to get into, of buying digital and information technology (tech)  companies or assets that will become core competencies in future. [ related post ]

Digital platform consortium – recognizing that one industry player may not have the risk capital or market muscle to create a platform, but collective action could. This blocks the path for born digital and tech titan new entrants that might otherwise transgress the blurring boundaries between industries.

A cynic might add that if the car companies buy such a unique asset, it takes it off the table – so nobody else can use it. They could just do nothing with it, and let it rust. Let’s hope they don’t choose that kind of value destruction path, but we have to acknowledge – it is a valid business strategy play.

It seems to me, the CEOs of these three car companies have asked themselves who might control their industry if they don’t step up to the digital challenge fast enough. In every boardroom today the question is being asked “how do we not get Ubered?”.  This kind of action, is part of the answer. It is how you take digital to the core of your industry.

Coming soon..
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Yesterday, July 3rd, came the news that Mike Bracken, head of the UK Government Digital Service (GDS) will be leaving.  During his 5 years in post, he revolutionized the way government thinks about technology and delivers it. His leadership and inspiration spread way beyond the UK and beyond government. He probably achieved more of lasting consequence in that period than many CIOs do in a whole career. However, inevitably if you shake things up a lot, the forces of status quo will eventually muster and your time will come to an end.

Image source: https://gds.blog.gov.uk/2015/08/03/onwards/

Some of the plaudits about Mike being written by journalists and commentators are like the kind of praise a top actor might receive at the end of a long running London West End play. Here’s just one example – from Tim O’Reilly.

If Tim can gush, then so can I, because so many leaders can learn from Mike’s example.

I first met Mike at a Gartner CIO Academy event we run in conjunction with Oxford University. He was preparing a presentation about his work creating a digital platform at the Guardian Media group. The following year he delivered that great presentation at Gartner Symposium 2010 in Orlando. My subsequent visit to his office was a marvel. Open drop-in desks inhabited by hackers, some of them volunteers – working directly on mobile apps, content and code – most of it very open. He’d taken a conventional newspaper IT function and turned it into something that looked more like a tech startup.

When he moved to be the head of tech for UK Government, I wondered how the step up felt – maybe it was a bit intimidating. But when I interviewed him last year he told me:

I got to government, and I recognized the facade, which was the buildings are big, but the services are just not that complicated.  Once you see that, as a technologist, you just become a lot more confident. 

He went on to explain that many government online systems, even in a country with a population of 64 million, don’t have a particularly difficult magnitude or complexity of transactions to process. In a world of Ebay’s and Uber’s – the majority of government administrative system loads seemed comparatively small, to his technical architect mind. That was a breakthrough insight. From there, he quickly formed a group that took online capability requests from elected political leaders – and just implemented them directly, sometimes in only weeks, using small teams of in-house full-stack development staff. By stripping away the traditional process of endless white papers, committee debates about functionality and big outsourcing contracts, Mike was ‘disintermediating the policy generalists’ – as he would put it.  The citizen user was the center of design and the developers worked only on what mattered to that user. Bracken applied all the tactics of a startup entrepreneur to bootstrap and grow an organisation where there was none. The GDS just kept delivering breakthrough, easy to use web based systems for citizens – from voter registration to car tax payment.

However Mike’s biggest achievements are as a true digital leader, more than a manager. He applies critical thinking, diagnoses the fundamental condition of a place, creates strategic remedies at a root cause level then generates a real sense of mission that others can sign up to. He inspires people and simplifies the problem for them at the same time. Often he and his leadership team moved forward by coining pithy aphorisms that encapsulated a fundamental truth, idea or principle. They even had some printed on the backs of business cards, very deliberately choosing the ITC Johnston font made famous by the wartime ‘keep calm and carry on’ poster.

Image source: https://gds.blog.gov.uk/2014/07/28/doing-the-hard-work-to-make-things-simple/

“Digital by default”, “Show the thing”, “The strategy is delivery”. These are memes Mike has imprinted on a whole new generation of digital leaders, including in the private sector, who will no doubt take his great work onward.

Nobody is perfect and if you work in UK government IT, I expect you can see plenty of flaws in the centralized, cabinet office originated, GDS approach. But leaders of this kind – people who positively redefine the landscape  – are too uncommon and we should celebrate them. Wherever he lands next, I’m sure Mike Bracken will be taking digital to the core of that organisation and it will benefit greatly. We are very grateful that he and his GDS colleague Russell Davies gave us some of their precious time during the research for our new book.

Publishing October 20th
Pre-order here

I just got back from Gartner Symposium in Orlando. It’s a huge event – many thousands of clients interacting with analysts to help solve real world technology and management problems. The energy is just great. I have been doing the job for 15 years and it is still incredibly stimulating. No two days are the same. The subjects, challenges and opportunities keep changing. You keep testing yourself, learning and growing. And as Gartner itself grows bigger, so does the scale of the opportunities. For example this week I launched my second book;  this one with Co-author Graham Waller. I also interviewed Jeff Immelt – the CEO of General Electric – on stage in front of a live audience of about 10,000 people.

Have you ever thought about becoming an analyst?  It’s a great time to do so. Because the company is growing, we are hiring. The website to browse is here  ( select ‘Research’ as the job field ).  A list of current research job subject areas is below.

Think about it – won’t you?

This week, two major business news stories provided evidence of the massive investment and strategic change needed to take digital to the core of a business. CEOs in all kinds of companies should watch and learn from what is happening at these supertanker sized firms as they make their long, wide turn towards becoming truly digital businesses.

Walmart stock took a hit when it announced expectations of flat sales this year and reduced EPS next year. There are several reasons that CEO Doug McMillon believes he must invest in the business during this time, to ensure its health longer term. One factor is labour – the company has raised wages for the bulk of its store employees, to keep those with better customer service skills. But another is an earmarked investment of $2Bn in e-commerce and digital platforms over the next 2 years. Wall Street analysts know why this must happen; Walmart must invest in the digital future – because that’s where the growth is and that’s where the threat comes from – called Amazon.

GE announced that it is selling its lending and leasing business to Wells Fargo. This is part of a long term strategy to exit financial services and consumer products and focus on industrial products. Within that new focus, GE’s industrial internet strategy – becoming a software and analytics company – is key. GE is investing heavily in the development of its digital and information technological capabilities. The money has to come from somewhere.  As Jeffrey Immelt told me when I interviewed him on stage at Gartner Symposium last week “There’s no doubt we take some of the capital from the dispositions and we put that into software and analytics.“

In both these cases, the CEOs are making very big investment choices. They are taking money away from conventional business and redirecting it towards digital business. Strategically it makes sense and most  investors can understand the logic, if the CEOs explain and sell it well.  There is sometimes short term financial pain, but the alternative is worse – a long term slide into decline.  GE and Walmart have made their bets – what about you?

(October 20 2105 is the official publication date for Gartner’s latest co-authored book. Website here. This post appears on both Graham’s Blog and Mark’s Blog )

If you are anywhere near the intersection of business and technology your world is changing radically. Back in early 2013 we started to realize just what was coming. Mark was formulating a piece called “every industry will be digitally remastered” – suggesting that sectors would be deeply impacted as their products and services were fundamentally redesigned for the digital age. Graham was increasingly concerned about the implications for leadership, especially as digital business doesn’t just disrupt markets, it disrupts tried-and-true management behaviors as well! Executives with an unconscious bias towards previous steady state management behaviors, now ill-suited to the unique demands of digital business, can be exposed to dangerous leadership blind spots.

Each of us had prior experience as management thinkers, coaches and book authors so we were keen to collaborate on a significant new work. It would aim to really help executives understand what is going on and orient themselves to the new leadership behaviors and styles that they must master to win – both personally and for their organisations. The difficulty is that the number of technologies in play – mobile, social, cloud, IoT, AI.. create a combinatorial explosion of creative possibilities. There’s no single technology trend above all others to pick out and analyse. So we took a step back and looked at the problem in a different way.

The result, two and half years later is our new book Digital to the Core. We offer you a framework to assess the impact of digital disruption on your industry and your company. The key question is how to lead others through the fog of uncertainty and complexity without getting lost yourself. No one company has figured out all the answers. So we went after many interviews with cases that had parts of the puzzle. GE and Babolat were our anchors because they were racing ahead in the quest to digitalize the products their sectors make, but we spoke with many others. Seoul National University Hospital Bundang, Zappos, Publicis Groupe, Ford, Orbitz, Visa, Shell, Bharatiya Janata Party (BJP), UK Gov, Volvo, BBVA, Tokio Marine. The more executives we spoke with and the more we explored the spaces in between – the more the repeating patterns started to emerge.

If you are in a senior management or executive position and you need to understand how to lead your company through the deep digital business changes ahead – then this book is for you. We hope you find our analysis and advice valuable. We are very confident you will at least find all the great company stories compelling. Good luck on your digital business leadership journey ahead.

Digital to the Core is available from Amazon and all good from October 20 in Hardcover, Kindle and iBook (an audio book version will follow shortly).  If you want to know a bit more about it start here: How Leaders Take Digital to the Core – Smarter with Gartner.

In our new book “Digital to the Core” Graham and I argue that digital change has become an external factor, driving or even dictating some of the direction in corporate strategy. Gone are the days when information technology was framed as a set of internal choices about how to support more efficient business operations. Nowadays, technology is redefining how markets operate and what products can do.

We spent a lot of time assessing the myriad changes that digital technologies are foisting on businesses. There is a great deal of noise as multiple technologies and sub-technologies contend. One moment mobile is vying for customer attention, the next moment it is social. One year AI is said to be the game-changer, the following year it is VR. We needed to take the analysis to a different level – to help business leaders see the changes in a more abstracted but enduring way. We boiled them down to three forces. These are more than trends because in the end they compel business leaders to act.

Of course there is never a single frame that gets everything right and we could have done it in slightly different ways. However we think our three forces capture most of the biggest changes that matter to business strategists,  in a simplifying and clarifying way.

The three forces we arrived at are

1. Resolution Revolution – ever improving fidelity of the data coming from all the sensors in the digital world and the ever more fine grained precision with which we can reach out and digitally control our world. These factors give business leaders opportunities to design far better products, services and business models if they choose to. However, if they don’t act, the progress gap widens until some competitor – new or old – steps in to take the opportunity.

2. Compound Uncertainty – the fog surrounding digital change that causes corporate indecision. Three sub-factors combine in complex ways to make it very difficult to plan: technology progress rates, regulatory change rates and cultural acceptance rates. It isn’t just the tech we have to judge – its the regulator and often it is the confused social and psychological responses of people to the advances that are becoming possible. Strategists have to either judge when things will fall into place – or become more proactive and start nudging.

3. Boundary Blurring – the dissolving of walls that previously separated industries from one another. As digital penetrates products, connects them to the cloud and starts storing and acting on the data they create, all kinds of overlaps arise between previously separate industry sectors and value chain positions. There are new spaces to go after and new opportunities for adjacency raids. Start-ups find the crevices between sectors, then start to hammer in new digital wedges.

In the book we explain and explore these forces, their effects and what to do about them, in depth using  examples from the cases we interviewed. In future blog posts Graham and I will explore each force in turn using everyday examples to show just how powerful they are and how they are reshaping your world.

You can find our more about our new book here: http://www.gartner.com/technology/books/digital-to-the-core/

In our annual CEO survey (paywall), we always ask “what are your top business priorities?” for the coming two years. Respondents provide answers in their own words, which we then categorize.  ‘Growth’ has been the top priority category for several years. This is no surprise at all – it’s the primary purpose of a CEO. When a company is growing everything is better – investment, hiring, profits. But where should a CEO seek that growth?

Since the millennium, international company CEOs have often sought that growth in emerging markets and particularly in China. The idea is to find a marketplace that is growing – then take your products and services there, and expect to get your share of that growth rate. Some of the best business logic is the simplest – and it works. Companies in all sectors, based all over the world have often been rewarded handsomely, simply by inserting themselves into China’s rapidly growing economy. However, now it is slowing – considerably.

China’s growth rate has slowed from over 12% at the start of 2010 to 6.9% in late 2015 (source).  So if the company has a projected growth plan predicated on a higher Chinese GDP rate, the spreadsheet model that drives the bottom line is displaying future years figures in red. Underperformance lies ahead. So what to do?  Business leaders must hunt for new growth territories as a partial substitute  – and that’s where digital comes in.

Digital isn’t a place of course and it isn’t a market in the same direct way. However, it has some similar characteristics when applied appropriately. There might be more customers online; within that there might be particular rapid growth rate segments – such as tablet-using customers.  Then there is digital product and service opportunity.  Connected products, with additional revenue creating services can be very attractive to customers and when such new ideas take off they often grow at non-linear rates. It’s no surprise then that our CEO survey found they expect the digitally attributable revenue of firms to rise from 22% of total revenue at the end of 2014 to 41% in 2019.

Are you still too focused on a conventional 20^th century geographic market strategy, in a BRICS slowdown world? It might be time to recognize that cyberspace is a market space – and one that often contains some fast growth opportunities. Accessing that new kind of market effectively will require changes in the the way your company operates and the capabilities it needs.  You will need to take digital thinking right into the heart of your business. That’s why we wrote “Digital to the Core” – our book to help you think through that journey and how to lead it.

In our 2014 CEO survey we discovered that business leaders see tech trends as the third most important of all the external macro factors that frame their business strategies today (behind economies first and regulation second). Yet the board of directors of most companies today, often lacks anyone with obvious technology experience and credentials.

The level of digital business disruption is rising and when in it takes hold in a sector it moves very quickly. So boards should be vigilant and able to act knowledgeably and decisively when needed. When I review the way the car industry has reacted so far to the autonomous drive innovation, or the way the sports equipment industry has reacted to digital products and wearables – I see very different levels of preparedness between major players. The board’s ability to sense when the big change is coming and take significant action – such as techquisitions – is vital. The scope and depth of change needed is often beyond the capacity of the executive committee alone to deal with. That’s because changes of business model or strategy need investor involvement, acceptance or agreement.

One key action a CEO and the Chairman can take is to bring a highly tech savvy member onto the board. Such as person would be individually highly capable and knowledgeable in an advisory capacity – but also very well personally connected in the world of technology. There are already examples of this emerging good practice

• H&M’s board includes Niklas Zennström, co-founder of Skype
• Walmart’s board includes Kevin Systrom, co-founder of Instagram
• McDonald’s board includes Margaret H. Georgiadis, President, Americas at Google Inc.

However this does not just apply to Fortune Global 500 scale companies. Take for example N.Brown Group the parent company of J. D. Williams – a large UK based distance selling retailer of clothing. In 1882 its eponymous founder was the very first entrepreneur in Britain to use the then brand new parcels service of the Post Office, as a retail distribution channel – and thus catalog selling was born. Today, most of its sales are online e-commerce and within that a significant amount is already on mobile.  With such a critical digital shift going on in its business model, it has chosen to include a tech-savvy board member from a silicon valley based, international private equity company.

To take advantage of your digital opportunities, before someone else uses them to disrupt to your business, your board should be following this kind of example. Cognitive diversity matters to strong corporate governance. If you look around the table and see no strong tech knowledge, it’s time to go out and find a new face. But where to look?  You could look for executives from ‘born digital’ companies, or VCs, or technology provider companies and mobile telcos.  Less commonly, some boards use technology savvy university business academics and industry analysts.  Each of these sources would bring different blends of knowledge and the kind of personal networks you will definitely need quick access to, when disruption looms.

Do not delay. A board without tech insight and connections, is flying blind.

Creating a tech savvy c-suite and board is just one important subject we cover in Digital to the Core – our new book about digital business leadership.

In Digital to the Core, Graham and I describe three technology enabled macro trends that are so powerful, they act as external forces on companies – compelling action. The first of the three, we call Resolution Revolution.

It’s obvious that Moore’s law is the fundamental root source of progress that continues to underpin the macro changes that the information age is bringing to business and society. But how is that exponential improvement factor manifesting itself today, in a way that CEOs can translate into strategic change thinking?  The technology industry speaks to business leaders in terms of a box of parts – mobile, social, cloud, VR, AI …  but naming those doesn’t help a board of directors in a traditional industry to grasp and think through the change opportunity and threat.

In our view the greatest manifestation of digital and information technology change is in the area of data and specifically in the change of quality of data. We are creating a world full of sensors and those sensors are creating much richer and clearer view of what is happening. At the same time we are connecting things and people in a way that allows us to take many more controlling actions in that world, quickly and precisely.

Resolution revolution is that effect of being able to see and sense what is happening in both the physical and digital worlds in ever greater fidelity and detail, then understanding and more precisely controlling things, events, and outcomes.  

Let’s explain it a bit more first with a current example, then second – with a future one.

Today, Uber takes advantage of the resolution revolution in its business model. It recognized that the smartphone in every person’s pocket contained location sensors. Using that new kind of highly accurate data, it could “see” all the street corners in cities where people were standing right now, looking for a ride. A market of transient unmet market opportunities was suddenly visible and trackable. Then it could use the same technology to precisely control the delivery of a solution – matching the location of a person who might be in their home a quarter mile away, washing dishes, but could get in their car and become a taxi driver for an hour. Uber used the new kind of data (location), that did not exist a few years ago, as an asset. It built a model from the fidelity of location data and the precision control that smartphone connected people could provide.

Fine grained data fidelity and opportunities for more precision control are progressing at Moore’s law speed, opening up completely new levels of value opportunity. One future manifestation of these factors can be seen in two high tech pharma startups. Proteus digital health has created a tiny, inert RFID sensor than can be inserted into pills. The sensor is the size of a couple of grains of sand. It can be ingested and excreted without being noticed. When it meets a person’s stomach acid – it’s metal elements create a tiny battery. That powers a circuit that sends its ID wirelessly – to an amplifier and then onward to a smartphone. The technology provides exquisitely detailed data about medicine consumption – every pill can be identified and we can know whether the patient consumed it and when. But the resolution revolution isn’t only about what we can know like this – it is also about what we can do.

Aprecia Pharmaceuticals uses digital technology to exert a new degree of precision control over pills. The company has been mastering the 3D printing of individual pills. This has at least two potential advantages. One is the ability to control the dissolving rate of the pill. By using different designs and internal porous structures that can only be done by additive manufacturing, they can create pills that dissolve far more quickly and design for different dissolving times. That can be used to control the rate at which active ingredients are delivered into the patent’s bloodstream. Secondly – by building pills individually, they can create precise dosage and compound mixes. Instead of offering a standard 50mg or 100mg, the physician could potentially prescribe a 73mg pill for a patient or one with 30mg of compound A, and 87mg of compound B.

We are not suggesting that either of these pill technologies will be a big success. We are not qualified pharmaceutical technology specialists, so we cannot make such a judgement. The story of these two pills simply shows the resolution revolution in action and what kinds of revolutionary product experiments it is making possible. We believe that this force can and will be applied to revolutionize all products and services. As a result – every industry will be digitally remastered.

Of course the key question for business strategists is when. When will there be a breakout of digitally remastered products and services in our industry?  That is the subject of our second force called ‘Compound Uncertainty’. I will explore that one in another blog post quite soon.  Or, you could get our book – from which all these ideas and research are drawn.

Digital to the Core is out now, in print, iBook, Kindle and Audible audiobook.

People as old as me can remember when the internet arrived and when companies created their first websites. Very quickly, it became obvious that some big companies could sell their stuff directly to end customers by electronic commerce, because websites could be developed to become online self-service machines. Orders could be taken, products could be configured and in some cases even parts of the delivery could be completed over the internet. It was true for airline tickets, hotel rooms, car insurance and a raft of other things. This process of applying this new ability to sell directly and cut out the middleman was called disintermediation  by the management thinkers of those early e-business days. Traditional travel agents and insurance brokers lost out, sometimes badly. However, in many industries what quickly happened is that price comparison websites grew up to compare and contrast all of those producers who wanted to go direct to the end customer. New online intermediaries such as Orbitz,com and Moneysupermarket.com inserted themselves between the customer and the provider’s website – a process that was dubbed reintermediation.

The contrast between those two terms got me thinking recently, about another set of changes has been happening as a result of digital progress. Some products have been dematerialised by being remade entirely of bits and conveyed over the internet from the producer to the consumer. This has happened to newspapers, books and music CDs – with paper and plastic material being removed from the product. Now I think we are beginning to see a new trend I call rematerialisation. This is where a product is re-rendered in a different way, in a different form, using different materials, as a result of digital changes – but it remains a physical product. Examples of this are to be found in 3D printed jewelry, electronic cigarettes, Google’s rendition of the car, or the camera drone as a replacement for a helicopter plus video cameraman.  In each case there is still a thing you can touch or hold, it is made of atoms and it serves a similar purpose – but it is utterly different and radically superior in some way because of digital technology.

So if your product or service today, exists in the physical world and its food or transport or something that cannot be fully dematerialized into bits – then you have a new strategy question to ask yourself. How could our product or service be rematerialized  for the digital age?

A traditional view holds that information technologists generate way too much  jargon. It irritates business people; a source of friction that impedes progress. As an analyst I have certainly seen that problem many times in the past, but it isn’t troubling me these days. I think we have flipped to the exact opposite problem. Technologists are not creating enough of the new technology-related business and management terminology needed for a productive business conversation to advance more quickly.

There’s no doubt we are in a tech boom period and one that is rivaling the dot com boom of the late 90’s to early 2000s.  Consider some of the valuable terms that were added to the management lexicon back then:

• B2C and B2B
• E-commerce
• Business model
• Reintermediation
• Value network
• Freemium
• Longtail
• Open innovation

You have probably used most of those. They allow us to easily and quickly discuss new and better ways of doing business through the application of information technologies.

But today, technological change to business seems to be outrunning our ability to create words to describe it.  For example, I can find no generally accepted term for the business model type operated by Uber and AirBnB, despite their signal importance in boardroom discussions about digital disruption.  Meanwhile, older terms such as “I T” are in all kinds of trouble. These days it seems IT is constrained to meaning only some combination of older back office computing and supporting services. Many other kinds of information technologies and related capabilities are not considered part of IT.  Even when new terms do come along they can be terribly clumsy. The IoT for example – how do we say it out loud to each other? It is so embarrassing, nobody has dared to start saying “eyot” – so instead we have to half swallow it as we quickly spit it out  -“internetofhtings“. This kind of language difficulty is making it difficult to discuss important new issues such as the changing nature of industries.

In the business news world, a ‘tech’ company can be a maker and seller of information technologies such as Cisco or IBM but it is also used to describe Orbitz, Uber, Twitter and Grubhub – none of which make and sell technology. On Bloomberg yesterday, I noticed Sir Martin Sorrell, CEO of WPP repeating his view that Google and Facebook are media companies, not technology companies. We can’t seem to decide. When, one day, Ford or Volvo make and sell their first autonomous cars will they suddenly be re-designated as tech companies? Maybe. If Apple does decide to make cars we can be fairly sure it wont be re-designated an automotive company. Tesla? Nobody can agree whether it is automotive or tech.  The term tech is vague and presumptive anyway. It generally seems to be shorthand for information technology related. There are other kinds of technology in the world, but they don’t get a look in anymore.  Sorry, did I just type information technology? – I didn’t mean to sound like an 80s throwback.  I should have said digital.

There are some bright spots. I very much like the term “data science”.  That’s adding a lot and it seems to be sticking. “Additive manufacturing” is good too ( it’s what manufacturers do with 3D printers).  “Gamification” was another useful addition. We certainly could use more words for the new emerging technology related competencies. Steve Prentice and I were discussing the term  “blockchain” recently. That is a good example of what we need to see more of – a term that abstracts the generic model from the specific cases so that we can discuss, transplant and reapply the idea in other contexts more easily, without getting confused.

Did you ever wish that you could create just one new term that the whole world picks up and uses?  If so, now would be a good time.  We all need your help. Give it a go.

Like many analysts, I have been fascinated by the prospects of aerial drone use in everyday business. My first moment of awakening was seeing the famous UK Dominoes pizzadrone PR experiment video in 2013.  Since that time, whenever I speak with CIOs and business leadership teams of larger companies about it,  I am usually faced by a barrage of problems, complications and reasons why drone use can’t or won’t happen. Each reason is perfectly plausible. Each reason is a brick in a wall of denial. You can’t see though walls and they make you feel safe continuing to do business as usual. Such walls are exactly what enables the kind of disruptive innovation that Clayton Christensen has taught us all about. And yet we still keep on doing it – building walls of denial.

What has been amazing over the last year in particular, is to see how start-ups and entrepreneurs are addressing each and every objection and overcoming them methodically and at lightening speed. It is testament to how rapidly our modern digital economy is building upon itself to accelerate innovation progress. Ideas are shared globally on web videos, money to test ideas is raised on crowd funding sites, components are built on 3D printers, regulation thinking is evolved through social collaboration. These methods combine to rapidly find solutions. For example

“Unmanned, propeller systems landing in back yards are too dangerous” .  Why land at all?  This Russian Pizza copter didn’t. Nor does Google’s delivery drone experiment.

“If they fall on people and property it will cause damage”  Yes – but DJI already has a parachute system to help minimize that. There is no form of transport with zero risk. Risk is relative. Today’s pizza delivery methods sometimes cost lives and big damages .

“People won’t let those things fly over their homes.”   I think that’s probably mostly true. So why not let them just fly mostly over roads?  This new system will register your objection to home overflight. But maybe some people with homes on busy short-cut routes wouldn’t mind being paid. I could imagine that site becoming a toll collecting gateway system one day.

“There is no system of registration for these drones – they are anonymous”.  That’s a problem. I have posted a similar thought before. City AM reported yesterday an entrepreneur who started a famous taxi app, is now trying to solve that with a venture called verifly.com.

“The aviation authorities won’t allow it”.  They will be cautious- for sure. But they will be driven to act quickly by politicians if national economic advantage is at stake. Already countries are vying with each other to liberalize quickly. That’s one reason why Amazon’s drone delivery test facility is in Canada.

There are many other objections. Short range and limited battery life. Precision location finding. Performance in bad weather. Price performance and energy consumption per KG for package delivery – relative to existing modes. Noise. But it seems to me all are addressable to some extent. To anyone who fears drones falling on their heads, I say – stand in London or New York and look up. Why are you not afraid of that enormous jet plane?  Urban culture can shift just as it did to accept planes, cars and driverless rail transit systems.

What will be the first ‘killer app’ category for drone delivery?  I’m not sure it will be pizza. It could be anything. Spare keys to locked out people, emergency blood packs to accident scenes, urgent car parts or maybe flowers…  who knows?  All these examples are being experimented, usually by smaller nimbler businesses that just know how to say “what if…” and try, rather that sit around a big meeting table and think of all the reasons it can’t be done.

Here’s my bottom line. If Ford can believe some autonomous cars will appear on roads within 5 years, it’s hard to imagine why aerial drones won’t find at least a significant niche in delivery services. It is harder still to imagine how anyone can be sure enough to bet against that future. Sure, it will take a few years to perfect. But by then you might not have the capabilities, licences and business relationships to be able to catch up.