4. Unlocking Business Opportunity in Digital Trends
The connection between digital disruption and observing digital trends is important, but it is not the reason companies need to be constantly tracking digital trends. The value in the ongoing tracking of digital trends is to be preemptive, identifying opportunities and iteratively improvements to your business model, not waiting until new competitors have gained enough traction. This is why it has become increasingly common for CEOs and the entire C-suite of global corporations to demand that digital trends be an increasingly heavily weighted factor when updating their business strategy.
Reasons to Monitor Digital Trends
Examining trends in digital is simply a very important piece of the larger process of digital transformation. Why is it so important to look at digital trends? When observed consistently, these trends will reveal insights that are extremely applicable to the future of your company and your business model(s). If executed correctly, a good business process around digital trend analysis can even provide “predictive” analytical results for your organization. Specifically, examining digital trends will help you to:
Identify New Business Models
Digital trends do not just expose technologies and consumer behavior, they also reveal new ways of doing business and generating revenue. They can even reveal new economies that you didn’t know existed. Tracking digital trends for business model exploration and validation should help you challenge and question how you do business today, and whether or not it is sustainable. For example, the trend of autonomous driving has the potential to completely change the business model of auto insurance. What are auto insurance giants today planning to do about this?
Ward off Disruption
Some digital trends end up being “digital fads” and then go away. Other digital trends end up entirely changing the way people behave and interact with each other—for a long time to come. It’s safe to say, for instance, that Facebook and social media is not a fad, but a constantly evolving trend that has changed and will continue to change the way people behave and interact. How many companies has this impacted? How many new businesses has it inspired that have the potential to disrupt it, or play off of it? A close examination of digital trends in social media (or any other area) will give companies a head start on preventing themselves from allowing these changes to disrupt their business.
Better Understand Constituent Behavior
No matter what business you’re in, it’s very likely your organization interacts with people each day. These people may be consumers or employees, partners or vendors, or contractors or associates. These “constituents” of your business are all using digital differently today than they did 5 years ago and, they’ll use digital differently 5 years from now. Understanding their behavior and the changes over time is paramount to being able to serve them. Serving constituents well results in better efficiency, reduced costs, happier employees, partners, and customers.
Predict the Future
The golden unicorn of big data and analytics is to be “predictive.” While there is no easy path to being able to make accurate predictions about the future using analytics and trends tracking tools and methods, having a real line of sight to what is coming down the road is certainly possible. Perhaps most famously, predictive analytics has been used in actuarial science for a long time, and continues to get more sophisticated every few years. The next time you are on the phone with your auto insurance company, ask them how they calculated your rate—see if you can get a straight answer. Hint: your driving record nowadays is one of a myriad of factors they use to predict how many times you will get be in an accident in the future.
Applying predictive analytics to digital trends would and could make a powerful combination and while this is not being done effectively today, many smart people and many dollars are being dedicated to the challenge.
Maximize Your Digital Maturity
Back in Figure 4.1, we explored the digital maturity model we use to help large organizations measure where they sit in terms of their sophistication and competitiveness in digital. All companies, in due time, should strive to move up the scale, and maintain themselves once they have reached a high level of digital maturity. Trends analysis is critical to both the acceleration of digital maturity and maintaining a top spot in your industry once you achieve success. Achieving digital maturity is a moving target. You may be competitive now, but you will fall behind over time if you do not work hard to stay there. Trends will help to provide a constant context for where your organization sits on the maturity scale.
Figure 4.1 Digital trend driver
Practical Steps to Put Digital Trends to Use
If you want to impact change and results in your organization, digital trends can be a very powerful tool that can accelerate the results you want to achieve. However, trends are also a dynamic, complex tool that requires discipline and rigor to use properly. Executives ask us, “how can we realistically keep track of what is happening in digital in any meaningful way?” or “even if we have a method of tracking digital trends, how could we apply that to our situation in a practical, meaningful way?” The answer is with discipline, process and rigor . . . and great contextual visuals. To even consider routinely putting a digital trends dashboard system in place, you have to first know where your company stands today in terms of digital capabilities and performance. Simply put, you need to benchmark yourself—more on this in Chapter 5, but know that you cannot leverage digital trends if you do not know where you stand on the Digital Maturity Scale.
Understanding Trend Drivers
Consumer Behaviors Driving Trends
Consider sites that monitor and analyze consumer behavior. For example, Media Audit’s syndicated service measures hundreds of local markets in terms of audiences demographic profiles and media consumption behavior. Another example here is SM2 that monitors online conversations around companies’ brands.
Lifestyle Factors
Lifestyle trend sites help people make the shift to a healthier lifestyle. This has opened up multiple opportunities, for example, for Nike to build its Nike Fuel community, for Weight Watchers to thrive online, for Blue Apron for people who want to cook at home but don’t have time, to shop or learn to prepare meals from scratch.
Career Factors
More people are now open to freelancing for several companies versus working for one company for a long time. This trend has spurred the growth of sites like Upwork that allow companies to find freelancers with all kinds of skills. These sites help companies find the specialists they need and allow the specialists to find work they do best.
Family and Friend Factors
People are also becoming more open to leverage digital channels to facilitate their personal life. Examples include meeting people online which has driven an explosion in online dating businesses including Match.com, eHarmony and those targeting niche segments such as people meeting later in life at OurTime.com. Many continue to use sites like MeetUp.com to find like-minded peers for socializing, sharing hobbies, and sports activities and interests. And those interested in mapping their family roots are turning to Ancestry.com.
Financial Factors
The global financial crisis has reduced trust in traditional investment management services which has allowed the automated investing services such as Wealthfront, Betterment, Personal Capital, SigFig, and Mint.com.
Environmental Drivers Influencing Trends
Some form of environmental issue touches every industry and consumer either directly or remotely. That’s why more businesses are looking for ways to put environmental sustainability at the heart of their existing business models. As businesses start to understand the cost savings that can be realized through minimizing resource use, they’re beginning to turn to innovation for sustainability. For instance recyclebank.com offers inspiration and points for people who recycle their paper, plastics, and metal waste.
Economic Factors
The share economy emerged after the 2009 global financial crisis initiated a groundswell of people letting go of the need to own in exchange for stretching their dollars further. A billion dollar industry emerged with the rise in sharing sites for things such as renting rooms or homes using sites like airbnb.com, or tools and household items from sites like neighborgoods.net. The change created by the sharing economy is expected to increase over time as people have successful encounters with Airbnb, Zipcar, Lending Club and other popular sharing economy sites.
Political Factors
“The Revolution will not be televised,” while originating as the title of a song/poem from the 1970’s, is a revived phrase that encapsulates the type of influence that digital and social media has had on geopolitical events such as the “Arab Spring.” The 24/7 availability of news and information sites and desire for less corporate sources of reporting are driving the growth in independent news outlets such as the HuffingtonPost.com, TheDrudgeReport.com, and Salon.com.1
1 http://www.ebizmba.com/articles/political-websites
Societal Factors
Trends in social sites range according to age, with younger demographics opting for sites like Snapchat.com and Instagram.com. Meanwhile older demographics are becoming more and more active on Facebook. Young professionals still spend the majority of their time on LinkedIn pursuing career opportunities.
Innovations Enabling Trends
Digital technology isn’t the only enabling factor of digital transformation. In many cases innovations in business models, product development, and process improvement can be the catalyst.
Technology Innovations
Cloud technology has enabled many traditional models around music (changing from owning it to renting it through streaming rather than downloading it), photos (from storing them in photobooks to sharing them in cloud), and so on.
Business Innovations
Warby Parker is an example of a new business model that cuts out the middleman when it comes to selling eyeglasses. Their business model was innovative in that they eliminated the middleman and went direct to the customer. Their new model allows users to try on glasses in the comfort of their home rather than in a sterile, overpriced brick, and mortar store. The cost is significantly lower and shipping, including returns, is free.
Product Innovations
As an example of how product innovation could drive a new digital business model, consider Casper.com. Their nationwide fast and free shipping model of shipping mattresses using normal delivery services like FedEx or UPS would not have been possible without their product innovation that allowed their mattresses to be shrunk down into a small box.
Process Innovations
“Next-shoring,” the tactic of companies shifting their manufacturing strategies from outsourcing overseas to developing products closer to where they will be sold, allows manufacturers to increase the speed at which their products are replenished on store shelves. Immediacy is the primary factor of digital transformation and next-shoring allows that to happen. Of course the faster inventory can be moved to the consumer, the sooner the costs to warehouse, ship and dock goods can be freed up. This innovative practice is creating a new trend that is emerging to deal with the rise of a more technical labor force needed to manage supply chain operations. Because of rising wages in Asia, higher shipping costs and the need to accelerate time to market to meet retailer and consumer demands and next-shoring appears to be a strong new process trend.
Trend Potential
Wearables is talked about constantly, however to date there is a relatively small impact. But one shouldn’t consider the wearables trend beginning and ending with FitBit, Nike Fuel bands, or Apple watches. This trend has significant potential as the concept of wearable expands beyond an additional device to wear or carry and changes to a concept embedded into clothing, accessories and other items you already wear or carry for other reasons.
Just as Kindle was able to jump into the ereader market and dominate it after most publishing giants had written it off, with the right wearable the same thing could happen. It’s a trend to pay attention to whether it appears to have relevance to your industry or not. If you’re in the hotel business, you’re going to be paying attention to Airbnb, but what if you’re in the business of supplying hotels with certain supplies? What if you’re in the bed manufacturing, or bedding industry, or travel-sized soap and shampoo industry? A disruptor like Airbnb could disrupt your industry.
Trend Magnitude Potential
In 2007 Microsoft’s then-CEO, Steve Ballmer, laughed at the iPhone, saying “business users would never go for it, because it doesn’t have a keyboard,” and, at $500, it “was the most expensive toy in the world.”2 He went on to say, “We’re selling millions and millions and millions of phones a year. Apple is selling zero phones a year.” Whoops! The iPhone went on to become the greatest disruptor of any device since the computer itself, not only disrupting Research In Motion’s (RIM) wildly popular Blackberry phone, but the world of smartphones as well. Most significantly, it changed the entire face of mobile computing and changed the way we interact with each other on a daily basis. Apple had already proven it could capture a huge share of the market with the iPod.
2 https://www.youtube.com/watch?v=eywi0h_Y5_U&feature=player_embedded
Trend Longevity Potential
Before they pulled out of the wearables market, one of the questions Nike, and other wearables manufacturers asked was, “If you were halfway to work and realized you’d forgotten your fitness tracker, would you turn around and go back for it?” Market research discovered no, most people would not turn around. They’d turn around for their smartphones, but not their fitness trackers. In fact, after 6 months one-third of those who appeared passionate about their devices, would stop wearing their trackers at all.3 What Nike and other companies have realized is fitness tracker wearables have a very limited appeal—except maybe at New Years when people are making fitness resolutions. There are several reasons for the abandonment:
3 http://endeavourpartners.net/white-papers/
Fitness trackers are designed to appeal to fitness fanatics, athletes, or would-be athletes. Yet, less than half of Americans exercise. The abandonment rate, Endeavor Partners, a consultancy, noted in a white paper on the topic, “was alarming.”4
4 http://endeavourpartners.net/white-papers/
The initial novelty of a tracker is appealing, but it’s a trend that doesn’t last. That’s probably part of the reason that Nike and other manufacturers pulled out of the market and discontinued making fitness trackers. Not only was the market becoming saturated, but the apparent interest from consumers was on what more powerful software could do, not on the wearable itself. What will be interesting to see is who the wearables market disruptor will be.
While wearables is touted as a trend, the hype may be exceeding the technology, at least for now. Smartphones and apps have more appeal, more power, more accuracy, and more capability than most wearables. Until fitness wearables have a higher purpose and a more health-driven technology, like tracking heart rate, blood pressure, blood sugar levels, and so on, long-term appeal of wearables may be limited to the medical industry where wearables like Empatica, a watch that measures the onset of epileptic seizures, are beginning to get investor’s attention.5
Unlike Nike’s Fuelband, which earned the distinction of being the least accurate fitness tracker on the market, medical wearables must be at least 99.999 percent accurate, if not 100 percent accurate. Their data collection must be secure, and quality controls must be so much higher than for a device like a sports watch or pedometer.
Look for fashion conscious wearables, like Cuff.lo, Ringly.com, HelloMemi.com, or others that combine jewelry, headbands, rings, bracelets, and key chains with high-tech and mobile devices to disrupt fitness only trackers.
Trend Maturity
Where is your company in the technology life cycle? You need to put this in the context in the development of your business. You may have people running up to you shouting, “The internet of things! We’ve got to get there!” But you might currently be a traditional business just in the beginning of the product lifecycle. Therefore, the IoT currently doesn’t have an impact on your business. Or you may be a younger company with limited resources so you can only focus on one area until you grow large enough to drive your business using additional technologies and digital channels. Figure 4.2 illustrates the typical cycle technology runs through and how quickly it is adapted by businesses and put to practical use.
Figure 4.2 Gartner’s emerging technology hype cycle
Trend Adoption Stage
System entropy can do a decent job of statistically explain how the typical enterprise is willing to adopt new technology. In Figure 4.3 you can see that only a small percentage of companies are considered to be “innovators” or “early adopters”—meaning they are not many companies willing to stick their next hour and try new technology before it has been proven. The average business falls in the middle to late side of the adoption cycle—we would not advise any company to rush into adoption of any technology. The key to success is to do what is right for your business which is why monitoring digital trends and analyzing them, combined with additional disciplines described in this book will drive the best results.
Trend Sentiment
There’s a what, where, when, and how to monitor the sentiment of a trend through media (social and traditional). Sentiment is how a group of people respond to a trend. Are people completely excited about it and sharing it on Facebook? Twitter? LinkedIn? Just because someone is saying, “Wearables are changing my life,” does not mean you should invest in reaching your customers on their Apple watch. Just because a competitor says, “We couldn’t do business without Twitter, or LinkedIn” doesn’t mean your company is best served on those social media platforms. You might do better starting your own forum or site where your customers, the ones who are most interested in your product and services, can find like-minded peers. Remember that the right social media can amplify your message, but it can’t create it. Sentiment is going to come from the response and reaction of your customers to your message, product and service, and the ease with which they can get what they want.
There are all kinds of listening tools and digital media measurement tools where you can get a pulse or a sentiment analysis of how people are not only thinking about a particular trend, but how fast it’s moving. Maybe the magnitude of the trend is coming fast and furious, but the magnitude of what the impact will be is minor. Be aware that measuring sentiment digitally isn’t the only, or the best way, to measure a trend.
Monitor Digital Trends
Trend analysis is breaking down a complex whole into smaller parts so you can understand it. It’s understanding how and why things changed, or will change, or might change over time.
By breaking down a trend into its various parts, you can see (1) how or if it is relevant to your business, business model, or industry, (2) what parts of the trend can or can’t be used with your business model or industry, and (3) where the opportunities lie for your company, your business model or industry, and most importantly trend analysis helps predict where a trend may be headed so your company can be there to greet it when it arrives.
Identify What Matters to Your Company
The first place to start centers around knowing your own industry and the partners, vendors, and other industries you rely upon every day to do business. Who are your vendors? What companies do you partner with to deliver a total solution to your end customer? How does your product end up in the hands of a customer—what does the supply chain look like? Next, as the old business adage goes, know your customers. In the case of analyzing digital trends, knowing your customers means understanding the touchpoints they have with your company and product every step of the way. What is their journey like? How do they find you? Where do they find you? How do they first connect with you? What motivates them to buy from you? How can or do they give you feedback?
Identify Your Customer or Constituent Personas
Collectively you should think about all the individuals and groups that interact with your company as its constituents. All your constituents (whether customer, partner, or vendor) have several things in common as it applies to digital. They all want to interact with your company—and while doing so, have an easy, pleasant experience that enables them to get at what they want quickly.
Identify the Digital Touchpoints Your Customers Most Connect with You Through
Where are your customers experiencing pain or problems in connecting with you? Is it easy to connect, or must they jump through hoops? How many clicks away are you? Why? What technology, social media or purchasing options are they using to buy from you? Those are just some of the trends you need to pay attention to. Look to your analytics and trend analysis for more data to track.
Identify Trend-Related Research and Data Sources
Pay attention to the right data. It’s advice that sounds simple, but with a proliferation of the “so-called experts” on the web, it’s not. Learn to turn to solid research and data source sites like Forrester, and Gartner, the Pew Center for Research and well-established industry leaders such as eMarketer. We try to stick with a single daily data point and point of view on a digital trend in our blog.
Define a Trend Scoring Model
Create some sort of scoring model that will enable you to quickly find those product initiatives with the most merit. Group your scoring criteria into a few buckets. For example, you might choose buckets such as market size or margin.
Set a Recurring Trend Analyzation Process
It’s important to monitor trends and to do so routinely and consistently. Make sure your evaluation and trend monitoring processes focus on your customers’ actual expectations, not what you think is important to your customers.
Quantify Trend Opportunities to Prioritize Where to Focus
There isn’t necessarily one spot where you should jump in. Quantifying opportunity is about understanding where your product is in the Trend Lifecycle. What you may be reading, seeing, and hearing in the press might be caused by the press or the early adopters. You need to calm down and see what the size of the market truly is, how will it realistically get adopted by your business, and when will you really have heavy customer demand.
Action Steps
• Assign someone accountable for trends watching and ensure that person has a direct line to report to leadership.
• Identify the trend drivers that may impact the future of the products and/or services you sell.
• Identify two to three reputable sources of trends information.
• Take time monthly if not weekly to produce/review a trends report.