Fintech: The Disruption of Your Money

Fintech (technology supporting financial services) remains a popular area for startup activity and funding. The areas encompassed by fintech include wealth management, insurance, lending, mortgages, real estate, money transfers and remittances, capital markets, payments and billing, personal finance, reg tech and cryptocurrencies. While the hot area(s) of investment in fintech shift back and forth, the enthusiasm for fintech deals and funding continues to grow. The disruption of your money has begun!

By Allan Thomas Chiulli, DigElearn
www.DigElearn.com

February 15, 2019

Fintech (technology supporting financial services) remains a popular area for startup activity and funding. The areas encompassed by fintech include wealth management, insurance, lending, mortgages, real estate, money transfers and remittances, capital markets, payments and billing, personal finance, reg tech and cryptocurrencies. While the hot area(s) of investment in fintech shift back and forth, the enthusiasm for fintech deals and funding continues to grow. The disruption of your money has begun!

Financial services incumbents are a natural target for disruption by changing technology and new business models. This industry is encumbered by numerous stale business models and practices that make the individual consumer cry out “There has got to be a better way!”

After a career in financial services, my personal experience may offer insight as to why innovation by financial incumbents occurs slowly:

  • Culture: Large incumbent financial services firms like to think of themselves as “fast followers”. This characterization creates an industry wide culture that rewards an aversion to unnecessary change—the understanding is that you keep your job (and income) if you avoid the big mistake. This approach is permissible as long as product innovation within the financial services industry comes from expected players, is incremental in nature and focuses on new product features that are easy for others to quickly copy. After all, a popular new mutual fund discipline or annuity payout method is never unique in the market for very long.

    Thus, “fast follower” companies have the luxury of sitting back and watching innovation by others, monitoring to see if the new product or feature sticks and then quickly copying those innovations that succeed. There is little reward for sticking one’s neck out in front of everyone else by being first with a ‘Big New Idea’.

  • Technology: Financial service firms look at technology in much the same manner as they do product innovation: The safe and high reward path is, at best, taking the “fast follower” approach. Here’s the main reason: Financial service firms have historically benefitted from increasing margins at scale. For example, the additional resources required to support a $500 million mutual fund vs a $5 billion mutual fund are quite small compared to the 10X increase in income. The result is a culture of aversion to unnecessary change that also applies to technology. Given increasing margins at scale, companies believe their resources are best directed at growth-oriented marketing and sales initiatives, thereby creating commensurately higher margins than to spend resources on technology than may slightly lower costs. The result is that financial services firms take a “We’ll do it when everyone else does” mentality towards new technology.

  • Regulatory Pressure: Make no mistake about it, the regulatory and compliance pressures faced by financial services firms are often overwhelming. In addition, the strict requirements from many regulatory directives are often ambiguous and firms are left guessing as to a new regulation’s required actions and supporting documentation. In addition, the presence of ‘good intent’ (that is, I was not aware of the deficiency) and the ambiguity of their own regulations is sometimes ignored by a regulator on a hunt to identify and punish an actual or perceived deficiency or wrongdoing.

All in all, the combination of easy-to-copy innovation, higher margins at scale and an often ambiguous and unforgiving regulatory climate combine to create a culture that encourages an aversion to meaningful change, the adoption of a “fast follower” approach and places a low premium on meaningful innovation. As a result, financial services incumbents generally gather into a herd when confronted by innovative ideas. The most important question becomes: “Who else is doing this?” as I do not want to be first.

Meanwhile, despite the ambivalence of the incumbent financial services firms, enormous investments are occurring in potentially disruptive fintech opportunities. This phenomenon is occurring across the globe as total global fintech investment has grown over the past five years:

Global Fintech Funding Global Fintech Deals
Source: CB Insights
2014 $8.3 BB 885
2016 $19.3 BB 1,254
2018 $39.6 BB 1,707

In addition, many new fintech firms are gaining sufficient traction such that funding mega-rounds of $100 MM or larger are becoming more common, and especially in North America and Asia:

Global Total North America Asia
Source: CB Insights
2014 10 5 2
2016 18 8 10
2018 52 25 18

Lastly, there are now 39 fintech unicorns (with a private market valuation of $1 BB or greater) valued at a total of $147.4 BB (excluding Alibaba’s Ant Financial, whose 2018 $14 BB funding round occurred at a $150 BB valuation.) 16 of these 39 unicorns reached their $1 BB valuation for the first time in 2018. Furthermore, over the past several years, public fintech companies (such as PayPal and Square) have outperformed the large incumbent financial institutions (such as JPMorgan Chase and Bank of America) and the S&P 500.

So, where is all this excitement focused on? Here are ten emerging trends in fintech:

#1 The Battle For Deposits
Fintech firms are becoming more aggressive as they expand beyond their initial lines of business and begin chasing consumer deposits. Banking-as-a-service is emerging as a new product to help fintech companies capture deposits, as Green Dot and Cambr provide mobile banking capabilities to hundreds of firms. The end game is to capture the client’s paycheck, which opens dozens of service-providing and revenue-generating possibilities for these fintech firms (while incumbent banks are hamstrung by the Durbin Amendment mandating low fee charges to consumers on debit cards).

#2 Fintechs Morph Into Platforms.
The initial use case for many fintechs is now morphing into a wide-ranging platform of financial services. Robo-advisor Wealthfront is now entering college savings, lending and real estate. Robinhood stumbled badly in their attempt to offer high interest checking and savings accounts but is adding cryptocurrencies to its free trading platform. Cryptocurrency platform Coinbase is adding institutional investing, index investing and wealth management to its services. It appears that fintech firms are concluding deposits, platforms and data are the new gold.

#3 Southeast Asia is a Fintech Hotbed
Southeast Asia’s combination of an emerging middle class, high Internet access and increased smartphone ownership creates a fertile environment for new fintech platforms to emerge. Thailand, Vietnam, Indonesia, Malaysia and the Philippines now host startups in financial services, digital wallets, e-commerce and remittances. Alibaba’s Ant Financial and the ride hailing apps (after acquiring mobile payments apps) are active in all these countries. Singapore-based Grab is moving past ride-hailing transport services and food delivery to add a payments ecosystem, even as it begins to offer financial services to its driver, agent, and merchant community. Indonesia-based Go-jek is moving past ride hailing to become a payment hub through its Go-Pay app. These moves mimic how AliPay and WeChat have transformed China by becoming an online community of services far beyond their initial payments and messaging services.

#4 Unbundling the Paycheck
An early wave of fintechs provided a direct to consumer path through startups like Lending Club (personal and auto loans), SoFi (student debt) and GreenSky (home equity and renovation). However, new startups scrape off a piece of the paycheck to fund a wide array of services, including Alice (pre-tax spending), Even (earned-income advance), Goodly (student loan payoff) and Honey Bee (emergency funds). Meanwhile, Gusto and Earnin allow employees to access earned income ahead of their payday.

#5 Amazon Lurks at The Edge
Amazon is always looking for industries where they can remove margins and make money on data and convenience. The e-commerce giant now offers bank-like services that just fall short of becoming a bank, including Amazon Pay, Amazon Allowance, Amazon Go, Amazon Protect, Amazon Lending, Amazon Reload and Amazon Recharge. At this point, Amazon is not yet in frontal assault mode on financial services. However, once Amazon figures out their strategy, they can acquire or charter a bank and create significant disruption by leveraging their community of 310 million e-commerce users, 100 million Amazon Prime members and 1 million small business sellers.

#6 Democratization of Investments
The mutual fund was an early way of democratizing investments, as an investor could buy into a diversified mutual fund at an investment far below that of a portfolio of individual stocks. This was followed by mutual fund platforms that allowed easy buying and selling of mutual funds without contacting the individual mutual fund companies. Now, the trend towards democratizing investments continues, as micro-investment platforms (allowing small investments) emerge in new asset classes like music (Royalty Exchange) and art (Masterworks).

#7 Real Estate Enters the Digital Age
Fintech is now heavily involved in real estate through startups offering cloud-based platforms including listing, settlement, energy management, mortgages, analytics and title services. New business models, through startups like Ribbon and Flyhomes enable ways to make all-cash offers on homes along with guaranteed sales while startups like Verbhouse and Divvy provide rent-to-own paths to home ownership.

#8 Technology as a Distribution Channel
Blackrock, the world’s largest asset manager with $6.3 TR in asset under management (AUM) and Microsoft (the world’s 1st or 2nd most valuable firm, depending on the day) with their Azure Cloud service and 135 MM Office365 users, announced an initiative to create “guaranteed Income” for retail investors. This ambitious announcement belies the fact that, today, neither BlackRock nor Microsoft can provide a penny of guaranteed income to anyone. Guaranteed income requires an insurance company and neither firm is an insurance company. Still, there is something promising in this strategy as BlackRock looks to market its iShares ETFs in retirement accounts using Microsoft’s Cloud, Office 365 and Windows products as a distribution channel. As this technology-based distribution platform begins to reach out to consumers, every insurance company in the world will beat a path to BlackRock and Microsoft to become an annuitization provider to this product. Other firms with major consumer reach such Google with Chrome and Android, Apple with Safari and iOS and Facebook (already rumored to have a cryptocurrency initiative underway) with 2.3 billion global users may follow. Today, a dozen or so Chinese firms (Tencent, Alibaba, Didi Chuxing) with 500 million to one billion users already implement some version of this strategy.

#9 The Incumbents Focus on Mobile and AI
Banks sometimes mimic the startups. For example, Goldman Sachs’ Marcus platform provides no-fee loans ranging from $3,500 to $40,000 loans to individuals. Bank of America is offering free equity trades (like Robinhood) to its best customers. Still, most banks are content to improve efficiency by expanding their mobile offerings and through Artificial Intelligence (AI) initiatives like introducing chatbots for customer service and in streamlining loan processing. We have not seen a wave of acquisitions of fintech startups by the major banks as regulatory, cultural and legacy technology issues appear to keep the banks on the sidelines. Still, inevitably, we can expect to see a wave of acquisitions by financial incumbents as their own R&D efforts become increasingly marginal in impact.

#10 Cryptocurrency’s Business Model Needs Repair
The Bitcoin bubble popped as the price of Bitcoin dropped from a December 2017 high of $19,783 to below $3,500 in 2019. Meanwhile, cryptocurrencies are still searching for their “killer use case.” Foreign remittances, so far, appear to be the strongest candidate, but adoption has a way to go. Further, JPMorgan recently concluded that the average cost of mining a single bitcoin is now $4060 (versus a current average bitcoin value of around $3,600) while the energy consumption of the global bitcoin mining industry now equals that of Ireland. A lower-energy use alternative is a proof-of-stake mining model that requires miners to (essentially) buy a mining franchise and have this purchase price held as a way of reinforcing good behavior. Another approach is stablecoins, whereby the cryptocurrency value is pegged to assets such as the U.S. Dollar or gold. Issuers of stablecoins must hold reserves to back their coins, but then stablecoin issuers begins to look like banks. Stay tuned to see how these problems get fixed!

Gradually, Then Suddenly
The investment community keeps betting ever-increasing dollars that these new fintech firms will find their place in the new financial service ecosystem. The reason may be that technology and business model disruption will occur gradually, and then suddenly, as it has in many other areas. This “gradually, then suddenly” experience reflects the impact of new competitors coming from unexpected directions into a market. At that point, a “fast follow” strategy falls apart as the incumbents are culturally and technically ill-equipped to respond effectively to the nature and extent of the disruption.

In the end, will the tech giants and the new fintechs team up to create a new financial service ecosystem, or will the incumbents and startups join together via partnerships or acquisitions or, lastly, will the new startups emerge victorious? As this activity plays out on a global scale, new combinations of financial services incumbents, tech giants and fintech startups are shaking up financial services and the disruption of your money is just beginning.

Allan Thomas Chiulli is the co-founder of DigElearn, an online digital learning membership experience at www.DigElearn.com and the author of Winning in the Digital Tornado. Both are guides to digital transformation for business and technical people needing to catch up and stay ahead of digital transformation. Readers may take a free quiz to measure their Digital Savvy at www.DigElearn.com.

The Mobility Revolution: Getting There as a Data-Centric, Connected User Experience (UX)

One of the most amazing things about the Digital Age is its “convergence”, that is, how digital technologies and new business models blend together to create new products and services. Sometimes, the change is interesting, but limited in impact, such as Uber combining ride-sharing and food delivery to create UberEats.

By Allan Thomas Chiulli, DigElearn
www.DigElearn.com

February 1, 2019

One of the most amazing things about the Digital Age is its “convergence”, that is, how digital technologies and new business models blend together to create new products and services. Sometimes, the change is interesting, but limited in impact, such as Uber combining ride-sharing and food delivery to create UberEats.

Other times, however, the potential impact is dramatic and profound.

An example of a dramatic and profound impact is how our existing modes of transportation are transforming into “Mobility” or “mobility as a service” (MaaS). The result is that, in a Digital Age, mobility becomes a data-centric, connected User Experience (UX). Matt Cole provides an excellent definition of mobility that describes what is happening while also highlighting the primacy of the user experience (UX):

“Mobility is a combination of public and private transportation services
within a given regional environment that provides holistic,
optimal and people-centered travel options.”

I spend a good amount of time in downtown Austin and am always amazed at how quickly the city has exploded in its use of new mobility services. Austin is a great trial location for these new services – the weather is mild, a lot of people live in or on the edges of the city center while the downtown business, government and university area is compact, quite hilly and an open parking space was last spotted in 1973.

Now, almost every corner of downtown has Jump, Bird, Lime and Lyft electric scooters available. Sometimes they are in neat tidy rows; other times they are simply left leaning against a building.

A Jump Scooter (Owned by Uber), Lyft Scooter, Bird Scooter

There are also pedal and electric-assisted bicycles, either as single bikes or lined up in racks.

Electric Bicycles and Credit Card Reader

These options are geared towards short, frequent commutes or casual sightseeing where walking or taxi rides are impractical due to factors involving the distance, traffic tie-ups, wait times, availability and high trip costs.

Access to these scooters is easy through an app whereby a rider taps a button on the scooter and scans the QR code. That’s it. The scooter comes alive and the rider is free to ride off in any direction they choose. Instructions are minimal and common-sense. The bikes are credit card driven, but similar in convenience.

There usually is a startup cost, such as $1, and a time-based charge after that. The user then drops the scooter off at their destination, taps a button on the app and they are done. The next rider can take the same scooter wherever they please.

The scooter companies usually cap the top speed at about 20 mph and braking is carefully calibrated. The key, however, is that one has a sense of great adventure and freedom while easily scooting around a busy city center while pedestrians trudge to their destinations or sit in a car at red light after red light.

While these scooter and electric bikes are sometimes referred to “micro mobility”, a far greater effect is in play. New technologies and business models are coming on the scene and the disruption will be dramatic: Transportation of people and goods will soon revolve around data, connectivity and the user experience (UX), not the steel, rubber and plastic that we associate with today’s automobiles.

While these scooter and electric bikes are sometimes
referred to “micro mobility”, a far greater effect is in play.

Here’s why: Mobility and its associated services will soon far outstrip the profitability potential of traditional car making. Accenture projects that by 2030, revenues from manufacturing and selling vehicles (around $2 trillion) will be only marginally higher than they are today, and that profits from car sales will shrink (from $140 billion to $135 billion). Meanwhile, Accenture also projects that revenues from mobility services are projected to soar to almost $1.4 trillion—with profits reaching as much as $250 billion.

Utilizing 5G connectivity and smartphones, a new ecosystem surrounding mobility is emerging. Here is how it may all come together: The common denominator is a single app for trip planning. The individual Jump, Lyft, Bird and Lime scooter apps go away as a common user platform emerges that links all public and private mobility services: Ride sharing, scooter, bicycles, taxis, buses, trains and subways are all on the system. All of these mobility services are aggregated on a single platform and artificial intelligence guides the rider by making suggestions that incorporate the rider’s needs, preferences and history (after all, a scooter may not be practical in the snow or if the rider carries a briefcase).

The optimal trip is quickly planned, confirmed and then reserved. A single QR code or facial recognition enables all ticketing, payments and switches between modes of travel for the trip. Group travel is handled in the same manner. Four reasonably fit business people may be willing to share the adventure of riding three or four blocks on scooters to travel to a meeting on a reasonably nice day; however, there are times, circumstances and conditions where only a car will do.

Mobility and the associated services will soon far outstrip
the profitability potential of traditional car making.

The concept of a car also begins to change. The two game changers here are ride sharing services and autonomous vehicles. We are transiting from an ownership-centric society to one of a sharing economy. Sharing a ride, sharing a home, and sharing an office is becoming more of the norm.

Think of what happens when ownership of a car is no longer a necessary part of one’s life. As fewer people own cars, we all drive less while using less gas or electricity to power the car… gas or electricity taxes, tolls and license revenues, parking garages, billboard industry, repair shops, car dealerships, auto advertising, car rentals, public road infrastructure, insurance and driving schools are all impacted. New services emerge that converting parking lots, multi-story garages and our home garages into new manufacturing, recreation, work and living areas. Maybe a four-story parking garage becomes a robotic manufacturing center while the three-car garage in our home becomes a new indoor/outdoor pool!

The two game changers here are
ride sharing services and autonomous vehicles.

As autonomous vehicles begin to infiltrate into our lives, the data and design experience of cars changes. Artificial intelligence-driven predictive and optimization analytics optimize regional traffic flows, thereby reducing travel times, pollution and accidents. The result is:

  • Energy costs drop,
  • Traffic jams are rarities,
  • Vehicles hardly crash,
  • Energy demand drops, and
  • Costs per trip plummet.

The result is that whatever speed that you are traveling (in an autonomous car) is the fastest speed that will get you where you want to go in the least amount of time.

The design of cars also changes as to facilitate rider productivity and recreation. People can face each other and place tables amongst themselves. Cars can become mobile conference and entertainment centers that pick people up, facilitate a task, experience or entertainment and then drop them off.

Connectivity and payments will become as much a part of this new car as the tires. Voice services like Alexa will enable the user to accomplish pretty much anything in a car that they could at home. Food, gas or electricity, Netflix, conferencing, shopping and other personnel expenditures are handled by the rider in an easily automated manner. New mobile payment technologies, such as facial recognition, are incorporated into the car itself.

Cars may be purchased, leased, time-shared, rate-based, subscription-based or used through some other form of payments. Flexible micro payments will emerge as one leases a car for 30 minutes or 30 miles. If one does own a car, it may well be as an investment: Your car may drive you to work in the morning and then produce income for you as a ride share until it is time to take you home. Or, maybe your car is too busy providing rides and sends another car to take you home!

Connectivity and payments will become as
much a part of this new car as the tires.

Given this new vision of a data-centric, connected and UX driven mobility, the auto manufacturers are not standing by waiting to become the 21st century version of horse and buggy manufacturers. They are responding by developing technologies, forming strategic consortiums, developing partnerships and investing in startups.

For example, Ford jumped into the car sharing business with a pilot launch in London, is turning F-150s into drone launch pads, launched an on-demand bus sharing service with startup Bridj, launched a pilot for a lease-sharing service among friends in Austin and spun out Ford Smart Mobility as a separate entity to “do more faster”.

Meanwhile, GM is moving fast with some major moves as it launched its car sharing service Maven after acquiring Sidecar, invested $500M into ride sharing service Lyft and bought Cruise for nearly $1 billion.

BMW and Daimler merged their mobility operations under a single umbrella in early 2018, with each company taking a 50% stake in the joint venture. They have launched car-sharing (Car2Go and Drivenow), ride-hailing (myTaxi, Chauffeur Privé, and Clever Taxi), parking (ParkNow and Parkmobile), electric vehicle charging (ChargeNow and Digital Charging Solutions), and on-demand mobility (moovel and ReachNow).

Not to be outdone, nearly every day brings a similar announcement by Tesla, Toyota, Honda, Nissan, Porsche, Chrysler-Fiat, Volvo and the other major auto manufacturers. The theme of these announcements always runs along the same lines: Finding the magic elixirs in a data-centric, user experience (UX) mobility world powered by connectivity and payments.

The auto manufacturers, however, are not alone in this endeavor. Google’s self-driving Waymo unit is the first autonomous vehicle developer to deploy a commercial fleet. Waymo is widely recognized as the industry leader in autonomous driving technology. In October 2018, the company reported its vehicles had driven 10 million miles—an unprecedented number—on public roads in the US. This enormous driver data helps develop and enhance Waymo’s self-driving software, especially when it’s collected on public roads instead of test sites.

Waymo is also able to leverage Alphabet’s key technologies. Most notably, it trains its neural networks using Google’s open source artificial intelligence TensorFlow platform and its Tensor Processing Units (TPUs). Artificial intelligence thrives on analyzing huge data sets and Waymo’s 10 million miles of autonomous driving data represents an incredibly valuable resource.

Google has also integrated its Android mobile platform into vehicles through Android Auto. This allows Android users to view their mobile OS in their car’s infotainment center, making it easier to access contacts and stream music, among other functionalities. Android Auto is now available in more than 400 car models from brands such as GM, Hyundai, and Volvo.

Waymo is widely recognized as the industry leader
in autonomous driving technology.

Amazon, Apple and Microsoft also have major connected car initiatives that are beginning deployment. For example, Volvo, Nissan, and Toyota have partnered with Microsoft to utilize its connected car platform. Microsoft has also partnered with automakers including Nissan and BMW to enable its digital voice assistant Cortana in certain vehicles.

Microsoft also announced a strategic partnership with Volkswagen to create the Volkswagen Automotive Cloud, which will utilize Azure and the IoT Edge platform. This technology is slated to connect over 5 million new Volkswagen vehicles per year beginning in 2020.

Safety will, of course, always be a primary concern. The data-centric, connected car and other forms of transportation become self-aware safety zones for cars with human drivers as well as autonomous cars. They will not only take emergency evasive maneuvers but also anticipate potential hazards and dangers to riders, pedestrians and other vehicles. These systems feature new capabilities such as adaptive cruise control, automatic braking, traffic and lane departure warnings, and other alerts and automated responses.

Amazon, Apple and Microsoft also
have major connected car initiatives.

Other forms of transportation will experience the same disruption. Trucks, trains, subways, airplanes and ships will become autonomous in their operation. The data-centric and connected world will know where every one of these vehicles is located along with the path, direction, speed, fuel levels, engine condition, safety parameters, travel conditions and time of arrival.

Mobility as a Data-Centric, Connected, User Experience (UX).

The future of mobility is exciting and unpredictable. Surprises, both pleasant and unpleasant, will occur as we travel along this path. Only one thing is for sure: The day of the family car and family garage may someday go the way of the fax machine and iPod. Our mobility experience will change as it becomes data-centric, connected and user experience focused. This is an exciting time and we are just beginning this journey!

Allan Thomas Chiulli is the co-founder of DigElearn, an online digital learning membership experience at www.DigElearn.com and the author of Winning in the Digital Tornado. Both are guides to digital transformation for business and technical people needing to catch up and stay ahead of digital transformation. Readers may take a free quiz to measure their Digital Savvy at www.DigElearn.com.

Think Big, Start Small, Scale Fast & Always, Always Focus on the User Experience

I recently had a meeting with two senior executives at a very well-respected firm located in Austin TX. These are my favorite kind of meetings: The topic of the meeting was how to do something together that makes a “Big Impact”. And, by Big Impact, we mean that this project would have a significant positive impact on their company, their specific area of the business, their clients and their client’s clients. A win that helps everyone up and down the line. Lastly, by extension, and unspoken, the Big Impact would also help advance their careers in this company.

By Allan Thomas Chiulli, DigElearn
www.DigElearn.com

January 15, 2019

I recently had a meeting with two senior executives at a very well-respected firm located in Austin TX. These are my favorite kind of meetings: The topic of the meeting was how to do something together that makes a “Big Impact”. And, by Big Impact, we mean that this project would have a significant positive impact on their company, their specific area of the business, their clients and their client’s clients. A win that helps everyone up and down the line. Lastly, by extension, and unspoken, the Big Impact would also help advance their careers in this company.

So, now that the cards are on the table, how do we proceed? These are two capable executives who have successfully implemented projects throughout their careers. But, as they confessed, given they want to create a first in their industry: A webinar-based educational Path to Digital Savvy, they faced two challenges:

  1. They were not the most Digital Savvy people to begin with; and
  2. Building an educational product in the Digital Age is a new experience for them.

Now, the fun begins. As I told them, here’s the mantra for building anything – a product, service or company – in the Digital Age:

Think Big, Start Small, Scale Fast
& Always, Always Focus On The User Experience

Let’s break it down:

THINK BIG

If you can describe the pain that people are experiencing better than they can, then these people are likely to believe that you have the solution. In a Digital Age, this connection between people and their problem, need or desire, can become pure gold. Further, the problem, at first glance, may appear simple or mundane. Think of the tech giants that started out solving a simple, sometimes, obscure problem or two:

  • Facebook: People want to connect as groups without a physical gathering.
  • Amazon: People want to conveniently buy books for less.
  • Google: People want an easy way to find something on the Internet.
  • Zappos: People want to buy shoes without going to the store.
  • Netflix: People want to rent movies from their home.
  • Square: People want to process credit card transactions anytime, anyplace.
  • Twitter: People want to broadcast short messages at any time.
  • Robinhood: People want to trade stocks without paying commissions.

What’s fascinating about these, and other digital companies like them, is that they leveraged solving a simple problem, need or desire into companies with multi-billion dollar valuations. Further, almost every founder on this list can tell stories about the dozens (or, in Airbnb’s case, hundreds) of rejection letters they received from venture capital firms. Despite this discouragement, these founders and their companies stayed true to their “Think Big” vision and that is why we are talking about them today.

START SMALL

One of the most insightful learning experiences for entrepreneurs is Eric Ries’ definition of a startup in his 2011 book The Lean Startup:

A startup is a human institution designed to create a new
product or service under conditions of extreme uncertainty.

Let’s be clear: Extreme uncertainty is the assumed environment for startup development. As such, Ries’ book outlines a process to resolve this extreme uncertainty by using a process of continuous experiments to create data that constitutes validated learning. These experiments are performed using a Minimum Viable Product (MVP), that is, the smallest version of the product that enables experimentation and valuable user feedback. By implementing continuous experiments through an MVP, the startup engages in a Build – Measure – Learn cycle to help the startup properly define the market need and how their product or service fits this need. Sometimes, the validated data tells the startup their original idea does not work, and that they should “pivot” to address a different need – as defined by validated data from continuous experiments using their MVP in a Build – Measure – Learn process.

Simply put, in any new venture, you do not know what you do not know. The result is that new products and services are best built under a cloak of humility. It is best to assume that even the best idea in the world – the surefire ‘can’t miss’ – will somehow transform once it hits the market.

Therefore, the goal at the early stages of building a new product or service is two-fold:

  1. Keep the misses small – because, as they cost time and money, you do usually not get a lot of them; and
  2. Learn from experiments, data and failure (yes, there will be failure!) what is the Product – Market Fit is and, just as important, is not.

Lastly, let’s talk about failure. Most experiments will fail. No one likes it, but it is an inevitable part of the startup process. The most important factor in evaluating failure is how it came about. Was it the result of a pig-headed “damn the torpedoes, I’ll show the world I am right” approach? Or, was it part of a systematic, carefully planned and calibrated process of continuous experiments and measurements that created valuable validated data? A pig-headed approach is highly problematic while a process of continuous experiments creates confidence that a management team is responding to the market in a clear, focused and logical manner. Guess which approach gains additional funding?

SCALE FAST

Today, the cost of a starting a company is often less than $5,000. There are several reasons: The Internet offers low cost incorporation services such as Rocketlawyer.com; low-cost branding services are available through fiverr.com or at brandroot.com; open source (free) software eliminates the need for large up-front software acquisition expenses and startup incubators and accelerators provide low-cost office space, community and mentorship to entrepreneurs. Meanwhile, the Cloud eliminates the need to buy expensive servers and the high cost of maintaining data center infrastructure and personnel. In fact, Cloud companies often give away free Cloud user credits to startups in the hope of retaining their business as they grow.

By far, the most significant of these advantages is the Cloud. There are two ways of looking at the Cloud. The first is the cost savings from no longer needing to build, operate and staff a data center. This benefit is valuable, but it misses the larger second benefit: A company can scale up its product or service at the turn of a dial on an Amazon Web Services (AWS), Microsoft Azure, Google Cloud or IBM Cloud dashboard. The expense, hassle and time commitment of building and expanding a data center is replaced by a flick of the wrist. This immediate and always available flexibility is the most important and dramatic impact of the Cloud.

What this also means is that, from a business point of view, a product or service (from a technology infrastructure standpoint) can quickly scale up from 10 to 10,000 to 100,000 to 1 million users. This means a person creating a new product or service – at an existing company or startup – should “Think Big, Start Small and Scale Quickly.”

ALWAYS, ALWAYS FOCUS ON THE USER EXPERIENCE

Now, these two executives and I have our plan: We will Think Big, Start Small and Scale Fast. Is that it or is there more?

Yes, there is more, and it is the most important step of all because it carries through all of the above steps:

Always, Always Focus On The User Experience

Here’s why: In the Digital Age, one must always remember that the Consumer is King. A competitor’s product is just a website visit away. So, the User Experience (UX) is the most critical piece of all. I often refer to the User Experience as the Digital North Star. As such, I built my definition of Digital Transformation in my book Winning in the Digital Tornado around the User Experience (UX):

The impact on people and business from prioritizing and elevating
the user experience (UX), through the convergence of enabling
information, social collaboration and real-time connectivity.

This means that people are invited to engage with the experience you offer, not brow-beaten until they submit. The risk to the user shifts back to the product or service provider. This means that the product or service is easy to sign up for, easy to learn, enjoyable to use, valuable or rewarding to the user and easy to drop if they are not satisfied.

Digital marketing employs a strategy called “content marketing”, which differs from traditional advertising.
Traditional advertising is repetition-focused. Think of a man standing on the side of the street all day long with a bull-horn to tout his product. In 1885, Thomas Smith wrote a pamphlet entitled Successful Advertising, which provides valuable (and still valid) insights into the human psychology behind modern advertising strategy. Mr. Smith walks us through the thinking of a person viewing the same ad each of the twenty times they see it until, after the twentieth time seeing the ad, they buy the product. These include:

The first time people look at any ad, they don’t even see it.
The second time, they don’t notice it.
The fifth time, they actually read the ad.
The tenth time they ask their friends and neighbors if they’ve tried it.
The twentieth time the prospects see the ad, they buy what is offered.

Back then, if there were ten steps in a process behind a product or service, you shared the first two or three and let the consumer buy the product to learn the remaining steps.

Now, using content marketing, the consumer is treated with more respect. A company places all ten steps into a PDF, video or webinar that can be downloaded or viewed for free by anyone potentially interested in the product or service. The goal is to build authority (that you are the expert in the area) and validation (that you can be trusted to deliver what is promised). The consumer is invited into a relationship with you and rewarded for their interest. Once authority and validation are earned, the consumer will then engage in a transaction with you.

However, Successful Advertising does not focus on what happens during the next twenty times the ad is seen after the person buys the product. But, in a Digital Age, this is a critically important part of the User Experience (UX). The goal, after the purchase, is to build advocacy for the product or service by the consumer. That is, the goal is for the consumer to start telling other people – in personal conversations and with posts on social media – how happy they are with the product or service and how great the company is to work with. This is the most valuable advertising of all – and it’s free!!!

WRAPPING UP

With an approach that emphasizes Think Big, Start Small and Scale Fast combined with Always, Always Focus on the User Experience (UX), a new product or service is poised for success as goals and strategies are properly aligned to fit the development stage of the venture. With this alignment, the product development process is optimized and the probabilities of success are maximized.

Allan Thomas Chiulli is the co-founder of DigElearn, an online digital learning membership experience at www.DigElearn.com and the author of Winning in the Digital Tornado. Both are guides to digital transformation for business and technical people needing to catch up and stay ahead of digital transformation. Readers may take a free quiz to measure their Digital Savvy at www.DigElearn.com.

Gradually, Then Suddenly, Then Gone: Why “Fast Follow” is a Path to Doom in a Digital Age.

One of the things I enjoy as an author is that I get to talk to a lot of senior executives about their business. As you can imagine, I naturally steer the conversation to their digital transformation strategy.

Sometimes, we get into great conversations about what the cutting edge is and where it is going. Other times, my jaw drops to the floor in exasperation. For example, I had a recent conversation with an executive that I have a great respect for, but who told me: “Well, we do not know where digital transformation is heading. So, our plan is to wait until it is clear and then be a fast follower.”

By Allan Thomas Chiulli, DigElearn
www.DigElearn.com

January 1, 2019

One of the things I enjoy as an author is that I get to talk to a lot of senior executives about their business. As you can imagine, I naturally steer the conversation to their digital transformation strategy.

Sometimes, we get into great conversations about what the cutting edge is and where it is going. Other times, my jaw drops to the floor in exasperation. For example, I had a recent conversation with an executive that I have a great respect for, but who told me: “Well, we do not know where digital transformation is heading. So, our plan is to wait until it is clear and then be a fast follower.”

Then came a second statement that caused my jaw, again, to hit the floor: “Yep, we are great at execution and we will respond to digital disruption with full force.”

My response is best summarized below:

Most business executives who do not comprehend the true nature of digital disruption have these assumptions:

  1. The resulting change will occur on a manageable timeline and scale;
  2. The disruption will come from expected directions; and
  3. The needed response will be clear, easily achievable and success simply requires good execution.

This executive, who relishes a challenge, and I debated the validity of these three assumptions. In closing, I recommended that he take a close read of one of my favorite articles in the digital thought leadership space: “Gradually, Then Suddenly” by the Anand Sanwal, CEO of CB Insights. Much of what follows borrows from this piece and I thank Mr. Sanwal and his Team for their great work!

There are three trends that form the basis of my discussion with this executive:

  1. Technology Is Eating Every Industry

I began by pointing out that the top five publicly traded companies (by market cap) had dramatically changed from 5 and 10 years ago and there had also been a pronounced swing towards technology companies (Apple, Alphabet, Microsoft, Amazon and Facebook) and away from traditional manufacturing, oil and banks (Exxon GE, Citi, PetroChina and Total).

  1. Technology Adoption is Quicker Than Ever

Not long ago, one generation created the invention and the subsequent generations adopted it. The telephone and the auto took well over 60 years to reach an 80% adoption (by households) in the U.S. Meanwhile, air conditioning took about 50 years and electricity took about 35 years.

In contrast, the cell phone took about 15 years and the Internet reached about 60% adoption in only 10 years. Furthermore, the adoption of disruptive technology has exploded. For example, the iPod sold about 600,000 units during its first full year in 2002, the iPhone sold about 1 million units per quarter shortly after its introduction in 2008 and the iPad, introduced in 2010, sold 50 million units in less than three months.

Meanwhile, disruptive user platforms have experienced incredible spikes in user growth following their launch:

  • Robinhood, a platform offering free equity trading, added 4 million users in four years.
  • Coinbase, a cryptocurrency trading platform, added 25 million users in five years.
  • Alipay, the mobile payment app used by Alibaba’s e-commerce empire, added 700 million users in seven years.
  • WhatsApp, the message app, added 800 million users in five years.

The takeaway is that, once a digital business gets it right, there is no oxygen left in the room for anyone else.

Clayton Christenson at Harvard coined the term “Disruptive Innovation” in the early 1990’s to describe how a new startup may initially target less profitable, underserved market segments. The established players are often amused by the concept. But, over time, the startup improves and begins to move upscale with a better product, superior user experience and lower price than the established competitors. At some point, they begin to target the established competitors’ customers. By then, it is often too late for the established companies. They are trapped by legacy systems, hierarchical management structure, high fixed costs, long development cycles, limited flexibility and, most important, the absence of a culture of innovation. A great example is Borders laughing at tiny Cadabra, who started out with the crazy idea of selling books online, who is now known as Amazon.

  1. Enter The Unusual Suspects

One (hopeful) assumption that executives have in sticking with a “fast follower” approach to their digital transformation strategy is that they think they know their neighborhood. Many of these executives have decades of experience in their industry and know all the players incredibly well. What they are missing, however, is the fact that ‘born digital’ companies will come at them from all sorts of unexpected directions.

For example, Amazon has entered the lending space:

The very mention of Amazon entering a business can create a tidal wave of bad news for the existing participants. Look at the impact on Walgreens’ stock price after a rumor (just a rumor) emerged that Amazon was entering the pharmacy business: The stock price plummeted from $76.95 to $70.87 in two days! And, this was without an actual announcement by Amazon.

Large companies, many of whom believe that their size and scale provide moats of protection from competition, are also now subject to this incredible disruption. Mercedes Benz has long considered BMW and Lexus as its competitors, but is now concerned about ‘born digital’ companies like Tesla, Uber and Google.

Walmart thought it’s competitors were Target and Costco, but is now engaged in a global brawl with Amazon and Alibaba.

Hertz used to dominant the car rental business (vis-à-vis Avis and Enterprise), but now must compete with Uber and Lyft.

The Digital Age has not been kind to Hertz. In June 2014, Hertz’s market cap was $10 billion. By mid-2018, it was $1.3 billion. Uber is now estimated to have a valuation about 50 times higher than Hertz.

BOTTOM LINE: The Speed of Disruption is Gradually, then Suddenly, Then Gone

This company suffered when Apple launched its iPhone, as it stock price dropped dramatically from $120 to $30 and then stabilized into a band around $60 for about two years. Was it out of the woods?

No, it wasn’t. In 5 months beginning in late 2010, the stock price fell from $60 to about $5.

This company, Blackberry, went from global leader to a shadow of its former self, even as the press continued to award it accolades. Their mistake? They thought Nokia and Motorola were their main competitors, so a “fast follow” strategy made sense.

Here’s another company: Their stock price, due to pressure from unexpected digital competitors, saw a drop from $30 to the low teens, only to settle in a trading band in the high teens for several years.

Then, in a five-month period, the stock price plummeted from $15 to $10 and began a slow and steady drop to zero as the company went bankrupt.

Still, this company, Blockbuster, did not consider Netflix or Redbox to be competition. Their mistake? They thought Hollywood Video and Movie Gallery were their main competitors, so a “fast follow” strategy made sense.

We already discussed Hertz, but look at their stock price during its battle with digital competitors. Their stock price fell from $120 to below $90 and appeared to stabilize around $70 for a couple of years. Then, the stock price was slammed to $30 and continued its slide to $10.


Their mistake? They thought Avis and Enterprise were their main competitors, so a “fast follow” strategy made sense.

ONE MORE THING: This Is Just Beginning

Please understand: These companies are highlighted, but they are not exceptions. In the last 15 years, 52% of the S&P 500 companies have disappeared. That’s over half!

If this is happening to the large players with size and scale to protect them, how does a small and medium size business (SMB) have a chance once the ‘born digital’ disruptors arrive? Smaller companies, without size or scale to buy them time, face the same challenge of digital disruption, but with far smaller margins of error. If a small company has a “fast follow” strategy towards digital transformation, then they are skating on very thin ice.

HERE’S WHY: The Structure of Disruption Has Changed

One reason is digital disruption has rapidly accelerated is that the cost of launching a new company has decreased by orders of magnitude. The Cloud, often provided for free to startups, eliminates the need for a data center along with the cost, staff and long planning horizons. Now, scale is achieved by turning a dial on an AWS, Google Cloud or Microsoft Azure dashboard. The gig economy enables new entrants to add people under short-term work contracts with specific skills for specific tasks. Large staffs and their associated costs become unnecessary, even as the Internet allows people to work at home. Incubators and accelerators provide a wide range of low-cost services and mentoring to startups. Finally, the Lean Startup Method provides a reliable blueprint to building a product and company. This new flexibility enables digital companies to easily and quickly enter new fields of play at low cost, maximum flexibility and, most important, without having to follow the old rules. Many of these ‘born digital’ companies fail, but the ones that succeed can rapidly scale up in a manner that blows away traditional competitors.

The result is that traditional R&D-driven product refinement, with long development cycles, corporate hierarchies, large-scale ownership of assets, large staffs and high overhead no longer cuts it.

And, this is especially true in an age with unexpected competitors emerging daily. Look at how Amazon is attacking everything a bank does (short of becoming a bank itself – so far).

PLEASE LISTEN: So, To The Fast Followers

Please stop and think about what you are doing. We began with a picture of Mike Tyson standing over a boxer he had punched to the ground. The fact is, even when Tyson’s punch was a half-inch away from this poor man’s head, the impact was well on its path and with a ton of momentum, that punch still did not hurt. But, once it landed, the fight was over. Quickly and beyond all doubt. Today, digital disruption works in the same way. It will not hurt until it arrives. Thus, it is “gradually, then suddenly, then you’re gone”.

The “fast follower” strategy simply does not work once the ‘born digital’ competition arrives and it will be even less effective as time goes on. Please think of your digital transformation strategy as something you must actively engage in. Companies and executives need to develop their digital transformation strategy from a proactive perspective that looks out, to the side and ahead, as a reactive response is a likely guarantee of disaster.

Allan Thomas Chiulli is the co-founder of DigElearn, an online digital learning membership experience at www.DigElearn.com and the author of Winning in the Digital Tornado. Both are guides to digital transformation for business and technical people needing to catch up and stay ahead of digital transformation. Readers may take a free quiz to measure their Digital Savvy at www.DigElearn.com.

15 Questions Digital Savvy People Ask in an Interview (and This is How They Get Hired!)

Most people, in an interview, emphasize their experience, accomplishments, honors and education. After all, a person should rightfully be proud of who they are and what they have accomplished. Therefore, it appears to make sense to focus on these areas in an interview, sprinkle in a few questions about the company and its competitors and conclude, at the end of the interview, “That went well!”

Unfortunately, the idea that most of this interview is backwards-looking usually never enters their mind. It is only after never hearing back from the company again does one begin to suspect something went wrong, but this silence does not enable a person to pinpoint exactly what went wrong. In fact, it is likely that the questions this person did NOT ask is what ruined their chances. Worst of all, no one will tell them this. In the end, sadly, this person is certainly qualified, but probably still unemployed.

By Allan Thomas Chiulli, DigElearn
www.DigElearn.com

December 15, 2018

Most people, in an interview, emphasize their experience, accomplishments, honors and education. After all, a person should rightfully be proud of who they are and what they have accomplished. Therefore, it appears to make sense to focus on these areas in an interview, sprinkle in a few questions about the company and its competitors and conclude, at the end of the interview, “That went well!”

Unfortunately, the idea that most of this interview is backwards-looking usually never enters their mind. It is only after never hearing back from the company again does one begin to suspect something went wrong, but this silence does not enable a person to pinpoint exactly what went wrong. In fact, it is likely that the questions this person did NOT ask is what ruined their chances. Worst of all, no one will tell them this. In the end, sadly, this person is certainly qualified, but probably still unemployed.

It appears to make sense to focus on these areas in an interview,
sprinkle in a few questions about the company and its competitors
and conclude, at the end of the interview, “That went well!”

Digital Savvy people, however, approach interviews differently. Areas such as experience, accomplishments, honors and education are important, but they are on the resume for anyone to review. Five, maybe ten minutes is spent on these areas as the Digital Savvy person has much more important things to talk about.

The critical element of a Digital Savvy person’s interview is how they actively engage – probing different areas of Digital Transformation, asking questions, seeking explanations, making suggestions, creating discussions, exchanging ideas – about a company’s Digital Transformation Strategy. This person’s ability to help a company address its digital challenges are clearly emphasized and carefully articulated. The Digital Savvy use the interview process to engage in a give-and-take, back-and-forth experience that clearly demonstrates that they provide critical digital knowledge, skills and perspective that an organization needs in a Digital Age.

So, let’s think about it from the interviewer’s perspective: Who would you hire? The “Qualified” person who displays competence over their career (but who doesn’t understand the Digital Age) or the “Needed” person that can come in and rock it in the Digital Age? In the end, the Qualified person gets silence and the Needed person (the Digital Savvy person) gets the opportunity.

The critical element of a Digital Savvy person’s
interview is how they actively engage.

Now, let’s illustrate this different approach: What are the types of questions a Digital Savvy person might ask in an interview? Well, in case you do not know, here is a list of 15 Questions that Digital Savvy people are likely to ask in an interview.

First, however, please understand that these are not “Yes” or “No” questions (unless the person doing the interview is digital obsolete!). Rather, each question is an opportunity to explore and engage where the direction an organization is heading, the strategy they are using, the challenges they face, the resources they are expending and where you could contribute to their Digital Transformation Strategy.

The Qualified person spends their time talking about what they did five or ten years ago while the Digital Savvy person sells themselves as they explore how they can help an organization prosper today and tomorrow in a Digital Age.

Get it? Each question is an opportunity to sell yourself!

Here are the 15 questions (in no special order):

1) How are you using machine learning, chatbots and natural language processing to improve your company’s UX (user experience)?

2) How are you employing The Cloud to create and scale new business models and initiatives?

3) How does validated learning from continuous experiments factor into your data analysis for decision-making?

4) How many experiments are you running per quarter and what is your process (dashboard?) to monitor and evaluate progress, success, failure, validated learning, scale up and drop decisions?

Each question is an
opportunity to sell yourself!

5) How do you communicate and collaborate your Digital Transformation Strategy to your employees, partners, vendors, customers and other stakeholders?

6) How are you using continuous experiments, validated learning, small teams and gig workers to create a continuous ideation and innovation process across your entire organization?

7) Who is ultimately responsible for the success of your Digital Transformation Strategy, why was this person chosen and how is “success” defined by your organization?

8) How are you using validated learning to develop and refine your buyer journey, buyer personas and sales funnel?

9) How is the Platform Revolution helping and/or hurting your organization and what is your next step to leverage Platforms?

10) What are the digital threats that today you might consider a “gradual” threat today, but that could arrive “suddenly”? What are the similar opportunities?

The Digital Savvy person sells themselves as they
explore how they can help an organization
prosper today and tomorrow in a Digital Age.

11) Does, and if so, how does the convergence of technologies, such as the Internet of Things (IoT), mobile payments, augmented and virtual reality (AR/VR), robotics and 3D printing, factor into your long-term plans for Digital Transformation?

12) How does GDPR impact your business and data environment and does GDPR constitute a threat or competitive advantage?

13) How does Artificial Intelligence (AI) and blockchain impact your Digital Transformation Strategy in the near and long term?

14) Are you creating or investing in Startups and where do you see Startups as a threat or opportunity?

15) How do you keep your employees up-to-date on the most recent trends in Digital Transformation and Disruption?

And, as a reward for reading this far, here are five more questions that a Digital Savvy person may ask in an interview:

1) What is the best example of the digital convergence of technologies (such as AI, Big Data, Blockchain, Cloud, IoT and AR/VR) that you have experienced and how did it help this organization?

2) Where do you think your Digital Transformation Strategy faces its biggest challenges?

3) How do you see radical personalization, best possible journey and omnichannel marketing as an opportunity for your organization?

4) How could tech giants like Amazon, Google, Microsoft, Facebook and Alibaba enter your market by leveraging their platforms, AI, data and UX?

5) Most importantly, what is your plan to create a UX that is the envy of the industry and how important to you is this mission?

Now, I have two questions for you to think about:

1) How many of these questions would you ask if you did not read this blog?

2) Has omitting these digital perspective questions hurt you in past interviews?

Now, you can only use a few of these questions in a single interview and (obviously) many are not applicable to all circumstances. Still, let’s look at the bigger picture: By illustrating the type of questions that Digital Savvy people ask in an interview, you can hopefully develop a better handle on the thinking and perspective used to create the specific questions that you should ask in your next interview.

Has omitting these digital perspective
questions hurt you in past interviews?

Also, the key to your digital success is not simply asking the questions, but in understanding the context of the questions, which allows you to ask the question and begin digital engagement on the subject. Through your digital engagement, you demonstrate how you can help this organization address their challenges in a Digital Age. And, that is how, in an interview, you transform from Qualified to Needed!

The key to your digital success is in
understanding the context of the questions.

I know the difference between Qualified versus Needed from my own personal experience. Despite my status as an author, I still get contacted for positions periodically and always accept an interview opportunity. However, there is a huge difference between my interviews from before I began my journey to Digital Savvy and now. Before, I took the traditional route and got silence in return. And, I would wonder why.

Now, I engage in a Digital Savvy discussion from the get-go! I skip the entire experience, accomplishments, honors and education thing. The results are quite difference: Now, I often not only receive job offers, but I also receive offers to join firms as a partner. Same person, but two very different results.

Now, I engage in a Digital Savvy
discussion from the get-go!

So, if you look at these questions and do not feel comfortable asking them, that’s fine too. There is hope! There is empowerment! You can become Digital Savvy! Our new book “Winning in the Digital Tornado” and membership website at www.DigElearn.com provide a step-by-step, easy-to-follow and easy-to understand Path to Digital Savvy. In this flexible, time-efficient and minimal investment learning experience, I share my own journey in the Digital Tornado and our incredible Path to Digital Savvy.

Using these resources, you can become Digital Savvy. It all up to you. You just have to decide to do it. You will Win in the Digital Tornado!

Please check us out at www.DigElearn.com.

Allan Thomas Chiulli is the co-founder of DigElearn, an online digital learning membership experience at www.DigElearn.com and the author of Winning in the Digital Tornado. Both are guides to digital transformation for business and technical people needing to catch up and stay ahead of digital transformation. Readers may take a free quiz to measure their Digital Savvy at www.DigElearn.com.

Does Ageism Squelch Entrepreneurship?

I walk into the Capital Factory, a start-up incubator in downtown Austin TX, on a Tuesday afternoon. The first thing that strikes you is the incredible energy in the place. In many ways, this is a marketplace of new ideas, but the ambience resembles a Middle Eastern bazaar: Lots of noise, movement and energy as people and ideas fly back and forth. The second thing that strikes you is that this is a young crowd. The old 1960’s hippie adage “Don’t trust anyone over 30” seems in vogue. People older than 30 are rare – they must be the mentors who help the young entrepreneurs. In fact, to a Silicon Valley crowd, 35 is the age where founders, in entrepreneurial terms, are considered over the hill!

An afternoon at the Capital Factory would lead you to believe that entrepreneurship is a young person’s game. The media plays up this stereotype by highlighting the disheveled, metro looks and attitudes of young newly-minted unicorn billionaires. Button down collars and three-piece suits are foreign to this crowd. Tom Agan at the New York Times article summed up most people’s expectations as follows:

By Allan Thomas Chiulli, DigElearn
www.DigElearn.com

December 1, 2018

I walk into the Capital Factory, a start-up incubator in downtown Austin TX, on a Tuesday afternoon. The first thing that strikes you is the incredible energy in the place. In many ways, this is a marketplace of new ideas, but the ambience resembles a Middle Eastern bazaar: Lots of noise, movement and energy as people and ideas fly back and forth. The second thing that strikes you is that this is a young crowd. The old 1960’s hippie adage “Don’t trust anyone over 30” seems in vogue. People older than 30 are rare – they must be the mentors who help the young entrepreneurs. In fact, to a Silicon Valley crowd, 35 is the age where founders, in entrepreneurial terms, are considered over the hill!

The old 1960’s hippie adage
“Don’t trust anyone over 30” seems in vogue.

An afternoon at the Capital Factory would lead you to believe that entrepreneurship is a young person’s game. The media plays up this stereotype by highlighting the disheveled, metro looks and attitudes of young newly-minted unicorn billionaires. Button down collars and three-piece suits are foreign to this crowd. Tom Agan at the New York Times article summed up most people’s expectations as follows:

“The most common image of an innovator is that of a kid developing a great idea in a garage, a dorm room or a makeshift office. This is the story of Mark Zuckerberg of Facebook, Bill Gates of Microsoft, and Steve Jobs and Steve Wozniak of Apple. Last week, Yahoo announced that it had bought a news-reading app developed by Nick D’Aloisio, who is all of 17.”

Still, studies on entrepreneurship may show why 50+ can be the best age to start a business:

We all know the stories of how Ray Kroc (at 52), Colonel Sanders (at 65) and Sam Walton (at 44) founded their amazing business empires. We also read about Reid Hoffman founding LinkedIn at 36, Chip Wilson starting luluemon at 42 and Bernie Marcus creating Home Depot at 50. The list goes on. Vivek Wadhwa, a well-known technologist, stipulates that “ideas come from need, understanding of need comes with experience and experience comes with age.”

https://smallbusiness.yahoo.com/advisor/older-entrepreneurs–the-startup-mentality-is-not-bound-by-age-000959494.html

So, what is the difference between the Capital Factory’s super-bright college student, impatient with classwork, who may even drop out to pursue his or her big idea and the older (40 plus! ?) man or woman as they undertake start-up opportunities?

The most common image of an innovator is that of a kid developing
a great idea in a garage, a dorm room or a makeshift office.

A story from my personal experience may help illustrate a common difference:

In 2002, I was working at Jackson National Life (JNL) where we spent $20 million to build and launch Denver-based Curian Capital, a fractional share-based Separately Managed Account (SMA) program. One day, during the buildout, I was visiting the JNL corporate HQ in Lansing MI when George, JNL’s extremely capable Head of IT, proudly ushered me into their corporate data center to show me his new prize possession: He and his staff beamed with pride as they unveiled a refrigerator-size $1.1 million mini-computer that would power all Curian’s operations. Now, we were still five months away from the launch of the company and had $0 in assets under management (AUM).

Today, this approach would be considered insane and would probably get George summarily fired. No one would dare incur a $1.1 MM fixed cost to create that much excess capacity in data processing. Today, data is on the Cloud at a low, metered (based on usage) variable cost. Additional capacity is added at the turn of a dial on an Amazon Web Services (AWS) or Microsoft Azure dashboard. Now, in 2018, it would take many years to spend the same $1.1 MM on data processing!

The point of the story is that, in a Digital Age, the rules of forming a startup company have changed. These changes are dramatic and for the better. Now, the days of extensive business plans, large upfront capital commitments, long product development cycles, corporate data centers, low and slow data usage, hierarchical management structures, large employee staffs and a “damn the torpedoes” mindset are gone.

In a Digital Age, the rules of forming
a startup company have changed.

If you walk into any Venture Capital (VC) funding pitch meeting today and mention any of the above factors as part of your plan, you can watch the VC folks pull out their iPhones to check their email as you kiss your funding chances goodbye. Of course, this assumes the VC people don’t get up and walk out.

The problem with so-called Ageism is that the Digital Obsolete still think in a year 2000-era frame of reference in building products and companies. So, the problem is not age, but the mindset towards digital transformation of many over the age of 40. So, Ageism does not stifle Entrepreneurship, but becoming Digital Obsolete sure does!!!

This new startup method, used by the Digital Savvy (of all ages), has a name: The Lean Startup, based on Eric Ries’ 2011 book. The essence of this method crystalizes in Ries’ definition of a startup:

A startup is a human institution designed to create a new product
or service under conditions of extreme uncertainty.

https://www.amazon.com/s/ref=nb_sb_noss_2?url=search-alias%3Dstripbooks&field-keywords=The+lean+startup

($20.80 Hard Copy New/$11.07 Used/$13.99 Kindle)

According to Ries’, regardless of size, sector or activity, a startup must acknowledge this uncertainty and determine if their a product or service:

  • Solves a problem,
  • Has a scalable market, and
  • Provides a benefit that people are willing to pay for.

If a startup does not satisfy all three of the above criteria, the startup should either be dropped or its product or service must evolve (pivot) to a new offering that does satisfy these three requirements. Assumptions and wishful thinking go out the door and are replaced by highly disciplined data analytics using a Build-Measure-Learn cycle.

Using a Lean Startup mindset and methodology, let’s look at how the Digital Savvy develop ideas, build products and create companies:

OUT: Extensive Business Plan
IN: One-Page Business Model Canvas

50-page ultra-detailed business plans are useless when confronting conditions of extreme uncertainty. Nowadays, no one will read long business plans full of guesswork projections and hockey stick revenue charts. Venture capital people joke that every startup’s business plan shows year three as the big winner! Instead, startups use a one-page, nine section Business Model Canvas. A popular version from Ash Murya is below:

https://blog.leanstack.com/why-lean-canvas-vs-business-model-canvas-af62c0f250f0

Or: search on “one page business model canvas” and click on images for a variety of samples.

OUT: Long Product Development Cycles
IN: Rapid Testing and Iteration

The two-year build and launch cycle is dead and buried. Now, the goal of product development is to learn, as quickly, efficiently and cheaply as possible, whether a product or service satisfies a need, has a market and people will pay for it. These answers come from constant, rapid testing cycles using relatively inexpensive and quick-to-market Minimum Viable Products (MVPs), thereby enabling a startup to generate validated learning supported by extensive data from actual customers. MVPs serve as a platform for rapid Build-Measure-Learn experimentation cycles that build on previous learning, continuing refinement and consistent improvement. DevOps, Agile, microservices and containers follow.

OUT: Large Upfront Capital Commitments
IN: Capital Contributions Tied to Progress

Large upfront commitments are rare as capital contributions are tied to achieving progress milestones. Still, the VCs recognize the inherent uncertainty in startups and that pre-set milestones may be missed. The VCs often weigh their confidence in the startup’s management team and the value of the startup’s validated learning as they evaluate additional contributions.

OUT: Corporate Data Centers and High Fixed Costs
IN: The Cloud and Low Variable Costs

Corporate data centers are out and the dashboard-driven Cloud is in. Capacity is added or removed at the turn of a dial. Data storage also moves to the Cloud and data scientists become extremely valuable.

OUT: Low and Slow Data Usage
IN: AI-Driven Predictive Analytics

Artificial Intelligence (AI), Big Data and the Cloud work hand-in-hand, that is, they converge into a single operating experience. The Internet of Things (IoT) is also important as remote devices are loaded with powerful Internet-connected sensors and processing power. Decisions are pushed to the edge, where the sensors are located as AI-driven predictive analytics replace guesswork.

OUT: Large Staffs of Employees
IN: A Core Team Surrounded by Gig Talent

Large, expensive staffs of employees are out. Core teams supplemented by gig workers form new teams, accomplish their task and are disbanded. The gig workers are talent, as they move to new teams or move back and forth among teams at different companies.

OUT: Hierarchical Management Structures
IN: Flat, Flexible Teams

The constant experimentation, and decisions whether to proceed to scale, require a flat management structure with a free-flow of information and the elimination of pet projects and vested interests. Innovation and responsibility are distributed and flattened. Leaders provide the vision and ensure a healthy ecosystem of core, talent, resources, experimentation, validated learning, technology, scaling, partners and distributors.

OUT: A “Damn the Torpedoes” Mindset
IN: Validated Learning and, Possibly, a Pivot

Today’s entrepreneurs should never assume anything! The “damn the torpedoes, full speed ahead!” mindset of yesterday is replaced by constant experimentation, an openness towards learning and an understanding that failed experiments are expected, valuable and instructive. In fact, too little failure may signal constricted thinking. Amazing transformations have occurred during Build-Measure-Learn cycles. The result may be a pivot: The original product or service is dropped in favor of a new product or service based on MVP-based validated learning that a revised product solves a problem, has a scalable market and that people will pay for it.

Here are seven famous business pivots by startups:

  • Twitter: Began as Odeo, which helped people find podcasts.
  • Paypal: Began as Confinity, as people beamed payments from their PalmPilots.
  • Groupon: Began as The Point, which was a social fundraising site.
  • Flickr: Began as Role Neverending, an online role-playing game.
  • com Began as Fabulis, a social network targeted towards gay men.
  • Pinterest: Began as Tote, which allowed people to browse and shop their favorite retailers.
  • Instagram: Began as Burbn, a check-in app that began as an online game.

https://www.forbes.com/sites/jasonnazar/2013/10/08/14-famous-business-pivots/

As we see, Ageism does not stifle Entrepreneurship, but being Digital Obsolete can. The rules governing startups changed – startups are faster, sleeker and cheaper than before. In fact, VCs at one time despised the Cloud, as the VCs received large chunks of equity in return for funding a startup’s data center. Now, VCs give away free Cloud credits to startups. The reason is that the Cloud enables the VCs, with the same amount of capital, to reduce risk as they diversify their portfolios across a larger number of startups.

This new startup method, used by the
Digital Savvy, has a name: The Lean Startup.

The Lean Startup is an important element in the human side of digital transformation and one that entrepreneurs of any age ignore at great risk to their new endeavors.

If you are not sure if you are Digital Savvy, then please go to our www.DigElearn.com website and take the FREE Progress to Digital Savvy quiz. Regardless of a high or low score, you now have a starting point to measure your improvement. Also, please visit our FREE digital learning resources and look at our membership programs.

You will Win in the Digital Tornado!

Allan Thomas Chiulli is the co-founder of DigElearn, an online digital learning membership experience at www.DigElearn.com and the author of Winning in the Digital Tornado. Both are guides to digital transformation for business and technical people needing to catch up and stay ahead of digital transformation. Readers may take a free quiz to measure their Digital Savvy at www.DigElearn.com.

Here’s Good News: It’s Not Ageism, It’s You!

Sometimes, one must title their blog and then duck, or they might get hurt. What do you mean it’s not ageism, it’s me? And, how in the world is this good news? The blowback can be pretty harsh, but you can’t solve a problem if you cannot properly define it. And, I am speaking from my own experience, my own denial, my own pain and my own coming to grips with a new understanding.

Thus, I stick to my title. And it is Good News! You see, many people over 40 (and especially over 50) see ageism is a major threat to their careers and livelihood. Others over 60 are just trying to hang on until retirement. Somehow, during this experience, those claims that 50 is the new 30 don’t ring true. It’s not a pretty sight when a company lets an older person go. This person may face extended unemployment, underemployment, having to start over and worry about what tomorrow brings. Bills pile up while paychecks don’t. The financial and emotional pressure can become severe.

By Allan Thomas Chiulli, DigElearn
www.DigElearn.com

November 15, 2018

Sometimes, one must title their blog and then duck, or they might get hurt. What do you mean it’s not ageism, it’s me? And, how in the world is this good news? The blowback can be pretty harsh, but you can’t solve a problem if you cannot properly define it. And, I am speaking from my own experience, my own denial, my own pain and my own coming to grips with a new understanding.

Define your Digital Savvy starting point with a FREE
Progress to Digital Savvy Quiz at www.DigElearn.com.

Thus, I stick to my title. And it is Good News! You see, many people over 40 (and especially over 50) see ageism is a major threat to their careers and livelihood. Others over 60 are just trying to hang on until retirement. Somehow, during this experience, those claims that 50 is the new 30 don’t ring true. It’s not a pretty sight when a company lets an older person go. This person may face extended unemployment, underemployment, having to start over and worry about what tomorrow brings. Bills pile up while paychecks don’t. The financial and emotional pressure can become severe.

The 2017 McKinley Marketing Partners study focuses on marketing careers, but summarizes the challenge many older employees face:

  • The people most in demand are those who can engage the right target audiences online: Digital advertisers get messages to a target audience, content people make sure messages keep consumers’ attention, and data scientists monitor results and interpret buyer behavior data.

 

Demand greatly exceeds supply for these skills.

  • On the other hand, supply exceeds demand for traditional marketers and advertisers, especially for those with ten years of experience or more.

In fact, the study shows that the market for traditional marketers with ten years of experience or more is virtually nonexistent, suggesting that a mix of low digital skills and high compensation history does not bode well in today’s job market.

So, we need to properly define a correct cause, and cannot afford to cling to a widely accepted correlation that may hide the true cause. You see, ageism is discrimination on the basis of a person’s age. And, while such discrimination may be illegal, it is difficult to prove in a job setting and almost impossible to prove during a job search. In other words, there is not much hope you can claim you did not get hired due to ageism. Realistically, how many of us are comfortable suing an employer before we even worked there? Not exactly a great resume enhancing tactic: I am suing the last company I interviewed with for discrimination!

We need to properly define a correct cause, and cannot
afford to cling to a widely accepted correlation
that may hide the true cause.

First, let’s step back a bit: Many of these ageism-type events relate to one’s lack of sophistication in the digital world. That is, we may not be Digital Savvy. Digital Savvy means we can understand, evaluate and anticipate the impact of digital transformation.  You know as well as I do that there is a digital divide between the younger and older. And, as we get older, our compensation increases and we are expected to deliver commensurate value to our company. But, many of us older types tune out of the digital discussions. Our thinking is: “Leave it to the others; or, I don’t get this stuff”. Twenty years ago, this approach may have been valid. The digital impact was at the edge of the business discussion; an afterthought for the recent college grads to figure out, like updating a website.

Digital Savvy means we are able to understand, evaluate
and anticipate the impact of digital transformation.

Today, however, the digital impact is at the core. The digital impact and the business decision are often one and the same. Those recent college grads of twenty years ago are now senior managers. We cannot tune ourselves out of digital discussion after digital discussion and expect to remain, highly compensated, at the table. Things do not work this way, anymore. The millennials understand this; many of us older folks do not. And, these same millennials do not think it is fair that we older, highly compensated folks may not be pulling our weight.

Inevitably, the day of reckoning comes, and we are shown the door. This may happen as a group. We look around at the people leaving and notice a lot of gray and thinning hair. The people letting us go are noticeably younger, often by a generation or more. So, we cling to the obvious age discrepancies and label this effect as “ageism”. We think of ourselves as victims of age discrimination and then conclude (wrongly) that all of this is beyond our control.

Here’s the truth as I see it: It’s not ageism if you do not understand the impact of digital transformation. It’s not ageism if you do not understand how digital transformation impacts your business and company or organization. It is not ageism if you are Digital Obsolete. And, the fact that becoming Digital Obsolete and being an older employee are highly correlated does not change any of this.

Now, and I need to duck again, this is Good News. You cannot prevent discrimination, but you have 100% control over your own actions. You can overcome becoming Digital Obsolete by becoming Digital Savvy. Furthermore, I know you can become Digital Savvy!

The reason I know that you can become Digital Savvy is that I went through the exact same experience. I remember telling myself that, as CEO of a start-up tech company, I cannot, by definition, be Digital Obsolete. Wrong! This thinking made sense only as long as I stayed in my small circle of like-thinking and Digital Obsolete friends!

It’s not ageism if you do not understand
the impact of digital transformation.

But, months after replacing myself as CEO, I was 60 years old and floundering in my search for my next opportunity. I wanted to hear a company tell me: “We love you and that you are exactly what we are looking for.” Here’s what I got: Silence, which is painful. Or, and this is where it becomes cruel, they told me that I am overqualified. Overqualified is polite language for “You are Digital Obsolete – too expensive, too little to contribute.”

I did have a couple of phone interviews with executive recruiters, but I never heard from the person again. How rude! I wanted to scream, “Does anybody know what is going on?”. Then, I wanted to shout, “What is wrong with the world?” Finally, I began to wonder, “What is wrong with me?” The outward pressure started to turn inward. This can be a very difficult time. If this sounds familiar, or is something you worry about, then it is time for you to take action..

What we need to understand is that we live in the Digital Tornado, that is, the rapid career obsolescence created by digital transformation’s enormous, unpredictable and accelerating disruption. The Digital Tornado has winners and losers. Sadly, the losers are the Digital Obsolete, who often believe they are victims of ageism. We become Digital Obsolete when we lack the digital knowledge base and perspective to effectively compete in a Digital Age.

The Digital Tornado is the rapid career obsolescence
created by digital transformation’s enormous,
unpredictable and accelerating disruption.

Once we are Digital Obsolete, no one is going to hire us at our accustomed level of responsibility and compensation. To me, this meant: Bye, bye CEO positions! What may also be surprising is that technical people can become Digital Obsolete. For example, software engineers can become Digital Obsolete through their continued micro focus in their area of expertise.

The Digital Obsolete also believe that their Digital Literacy is a valuable asset. They believe that Digital Literacy, that is, knowing how to use Office365, Google search, iPhone apps, Facebook and LinkedIn, somehow equates to an understanding of digital transformation. The reality: Digital Literacy is assumed for professional careers and is no longer enough for you to win in the Digital Tornado.

Here is the key takeaway: You win in the Digital Tornado by becoming Digital Savvy. And, better still, becoming Digital Savvy has nothing to do with age! Becoming Digital Savvy is not a deep dive into technology. Rather, it is about gaining a digital knowledge base and perspective for a business (and technical) person to make effective decisions in a Digital Age.

Here is the best news: The reason you can become Digital Savvy is because you want to. And I know this is because I went through the same journey and can show you the way. This is the same step-by-step, easy-to-understand and easy-to-follow path to Digital Savvy that I used. The path that I know works. This path works because when someone shows you what is important, and makes it simple, you can learn very quickly.

You win in the Digital Tornado
by becoming Digital Savvy.

Once you are Digital Savvy, digital transformation works for you, not against you. You hedge career risk and create career upside. You become and remain relevant. You create career confidence and enjoy peace of mind. And, if unfortunate things do happen in your career, you are much more competitive, prepared and can face your future with confidence.

So, what is the key to becoming Digital Savvy? Well, we believe it is Continuous Bite-Sized Learning or CBSLSM. CBSL creates many continuous small improvements that add up to a big difference. Here’s are some highlights of our educational research:

  • According to Bersini’s Modern Learner Profile, busy employees have 5 minutes per day to learn and
  • Neuroscience shows learning is best when people are asked to absorb 4 to 5 pieces of information.
  • A 2015 Dresden University of Technology Study shows learning works better and faster with smaller slices of content. The study showed a 22% gain in Retention and Learning Efficiency from bite-sized learning.
  • A 2012 Study by Boyette concluded that 94% of learning professionals state Bite-Sized Learning is preferred by their Learners.

The educational research shows that people:

  • Have about 5 minutes a day to learn,
  • Prefer smaller bite-sized lessons, and
  • Have better retention and learn faster with bite-sized learning.

So, CBSL (Continuous Bite-Sized Learning) provides the best path to Digital Savvy. This learning is not only easy, but it is fun—when you start to Get Digital, your perspective changes—you see your career, business and life differently.

CBSL (Continuous Bite-Sized Learning)
provides the best path to Digital Savvy.

Here is your first step: Define your starting point with a free quiz.

Please take the free Progress to Digital Savvy quiz at DigElearn’s (my company) website www.DigElearn.com. There are 30 straightforward multiple-choice questions that should take you 10 minutes or so. Maybe your score will be good; maybe it will be horrendous. It does not matter because, now, you have a starting point to measure your improvement.

Then you have two paths to Digital Savvy: The first is self-study.

We provide free digital learning material on our web site. Also, you can download the Table of Contents from my book Winning in the Digital Tornado. These resources will provide you a path to become Digital Savvy. And, I’m thrilled I could help you!

Or, if you are pressed for time and prefer a more structured path to Digital Savvy, join the DigElearn.com Founder’s Club (www.DigElearn.com).

This is a great way to catch up and stay ahead of digital transformation. The DigElearn Founder’s Club uses Continuous Bite-Sized Learning through daily bite-sized emails, a 20-module step-by-step, bite-sized digital learning program and user forums. All of these materials are available 24/7/365 whenever and wherever you are. This easily affordable bite-sized learning program works for you.

Please check us out at www.DigElearn.com. You will Win in the Digital Tornado and dump ageism in the garbage bin.

Allan Thomas Chiulli is the co-founder of DigElearn, an online digital learning membership experience at www.DigElearn.com and the author of Winning in the Digital Tornado. Both are guides to digital transformation for business and technical people needing to catch up and stay ahead of digital transformation. Readers may take a free quiz to measure their Digital Savvy at www.DigElearn.com.

Needed: An Actionable Definition of Digital Transformation.

A good definition provides a clear picture of what an asset or concept is (and, by extension, what it isn’t). It is something you can cut out, tape to the bottom of your computer screen and stare at every time you feel you are losing your way. The best definitions are prescriptive, not descriptive, and provides actionable insight.

I struggled with the definition of digital transformation as I was writing my book on digital transformation, Winning in the Digital Tornado. I traversed Wikipedia, technology publications, management consultants and respected bloggers, but could not find a definition that placed its finger on the essence of this term. Yet, it was only as I approached completion of my book that I began to realize the flaw inherent within the existing definitions. My journey, however, was enlightening:

By Allan Thomas Chiulli, DigElearn
www.DigElearn.com

November 1, 2018

A good definition provides a clear picture of what an asset or concept is (and, by extension, what it isn’t). It is something you can cut out, tape to the bottom of your computer screen and stare at every time you feel you are losing your way. The best definitions are prescriptive, not descriptive, and provides actionable insight.

I struggled with the definition of digital transformation as I was writing my book on digital transformation, Winning in the Digital Tornado. I traversed Wikipedia, technology publications, management consultants and respected bloggers, but could not find a definition that placed its finger on the essence of this term. Yet, it was only as I approached completion of my book that I began to realize the flaw inherent within the existing definitions. My journey, however, was enlightening:

The best definitions are prescriptive, not descriptive,
and provides actionable insight.

Here is where I and many others begin: Wikipedia, who provides this definition:

Digital transformation is the change associated with the application of digital technology in all aspects of human society.

Then, I looked at CIO (Chief Information Officer) Magazine:

Digital transformation is application of digital capabilities to processes, products, and assets to improve efficiency, enhance customer value, manage risk, and uncover new monetization opportunities.

And here is TechTarget’s definition:

Digital transformation is the reworking of the products, processes and strategies within an organization by leveraging current technologies.

What interesting is that, while none of these definitions are wrong, none of them provide actionable insights. By this I mean, what do you know after reading these definitions that you did not know before you read them?

Overall, I found these definitions offered a lot more about “How” than the far more important “What” or “Why”. So, my journey continued as I then examined what the leading management consultant firms had to say in defining digital transformation. Here is what I found:

Here is Gartner’s definition:

Digital transformation leverages digital technologies that enable the innovation of their entire business or elements of their business and operating models.

And Forrester:

Digital transformation is an enterprise-wide transformation — driven by the aggressive adoption of digital technologies but supported by equally important changes in culture, leadership, skills and processes.

And, finally, McKinsey:

Digital Transformation is creating value at the new frontiers of the business world, creating value in the processes that execute a vision of customer experiences, and building foundational capabilities that support the entire structure.

Of these three definitions, McKinsey by far does the best job. We’ll discuss why in a bit. Gartner and Forrester get lost in the How’s and skip over the What and Why’s. Finally, I looked at two highly-respected writers/bloggers in digital transformation to catch their insights:

Here is Brian Solis (www.briansolis.com):

Digital transformation is the realignment of, or new investment in, technology, business models, and processes to drive new value for customers and employees and more effectively compete in an ever-changing digital economy.

And Galen Gruman, Executive Editor, InfoWorld:

Digital transformation is the application of digital technologies to fundamentally impact all aspects of business and society.

One more time: Good definitions, but a lot more on How than What and Why.

What is missing in these definitions? I searched far and wide: These are the best of the best and I still found them wanting. In my humble opinion, either they are missing something critical or I am. Let me make my case:

The focus of these definitions (excepting McKinsey) are primarily on technology. At first glance, this approach may make sense. Isn’t our world changing due to technology? However, the result is that these definitions are limited, by this approach, to the How’s and not the What’s or Why’s of digital transformation.

A useful comparison might be defining an automobile by describing the manufacturing process without telling you what an automobile is used for and why. When you stop and think about it: Aren’t the reasons a person might want a car (freedom to travel) and how they would use it (to visit family or travel to work) far more important that the technology behind building an engine or constructing an assembly line? The What and Why are prescriptive while the How (technology) is descriptive.

The same is true for modern medicine. The technology behind a knee replacement is far less important than the new-found freedom of mobility and feeling of joy that a knee replacement provides to patients. Again, the What and Why are prescriptive while the How (technology) is descriptive. Nobody wants to see a video on how knee replacement is performed (except some surgeons), but tons of folks with bad knees are thrilled to watch a video of a knee replacement patient describing how they threw away their wheelchair and now enjoy long walks on the beach at sunset.

Digital transformation without a central focus on the
User Experience is like describing an ocean without water,
or human beings without love.

In my journey to Digital Savvy, it took me a while to understand that digital transformation is not about technology, it is about people. And, above all, how people interact with one another. That is the What and Why of digital transformation. Technology is one of the How’s. This is also true for business. So, we could conclude that digital transformation is about how a business interacts with its customers and other businesses. Still, it does not seem like we are quite there yet. And, that’s because we have not addressed the most important ingredient in the definition of digital transformation: The User Experience or “UX”.

Digital transformation without a central focus on the User Experience is like describing an ocean without water, or human beings without love. The core or essence is missing. We also call this the What and Why. The How (technology) comes later, much later.

Here is my and DigElearn’s (my company) definition of digital transformation:

Digital transformation is the impact on people and business from prioritizing and elevating the user experience (UX), through the convergence of enabling information, social collaboration and real-time connectivity.

We begin with “people and business”, the What of digital transformation, and then shift to the “user experience (UX)”, the Why of digital transformation. However, not just the user experience, but “prioritizing and elevating” the user experience. This means that, above all, digital transformation is about “prioritizing and elevating the user experience.” McKinsey, to their credit, also observed that the user experience reigns above all in digital transformation.

Now, we are beginning to have something you can cut out, tape onto your computer screen and stare at every time you begin to feel you are losing your way. A definition that is prescriptive, rather than descriptive. One that provides actionable insight. If you are working with digital transformation, then your user experience is your North Star, and prioritizing and elevating your user experience is your finish line (although you never reach it). Technology is a means to do this, not an end in itself.

Above all, digital transformation is about
“prioritizing and elevating the user experience.”

And, we go further “through the convergence”, because digital transformation is the result of people, technologies and data working in concert.

These factors converging include “enabling information, social collaboration and real-time connectivity.” Think of a rider using an Uber or Lyft app on their mobile phone and watch how digital transformation works. Information is enabled, including the rider and driver’s location, the rider’s credit card number, mobile number, destination, route and time of travel to arrival, the driver’s name, car make, model and year, mobile number and rating. All this information is immediately shared between the driver and rider and a fare is computed.

Enabling information also includes shopping platforms that use Artificial Intelligence (AI) to mine data about a shopper’s preferences. Their online shopping experience now conforms to their actual needs and desires. No more pushing baby formula on 70-year-old men. Brick-and-mortar shopping now relies on payment zones, not checkout lines. Friction is removed as information is real, alive and delivered on-demand.

Social collaboration is people or groups working together to accomplish a goal. For example, a driver decides to turn his or her car into a taxi and begins to earn money by driving riders to their desired locations. The ride is higher quality and lower cost than most taxi alternatives; and this in turn bring forth a greater demand for rides from riders that in turn attracts a greater supply of drivers, all a lower cost to the rider than before. Enhanced user experience at a lower cost—this is the essence of digital transformation. This new and higher market equilibrium of supply and demand for taxi services is called the two-sided network effect of platforms and is an integral part of digital transformation.

If you are working with digital transformation,
then your user experience is your North Star.

Real-time connectivity is the glue behind these digital transactions. A shopper in a grocery store turns down the pasta sauce aisle and immediately receives a text for a 20% off coupon for Bertolli’s marinara and garlic pasta sauce. Real-time connectivity also drives omnichannel marketing, whereby a customer’s online, brick and mortar, multi-device (phone, tablet and desktop) and multi-channel (email, text, website, social media and phone) experience is seamlessly woven into a single experience for a customer. The siloed interactions of the past, whereby the same information is repeatedly provided by a shopper, disappears.

Technology does fit in and is critically important, but as a How. We use technology, such as artificial intelligence (AI) and platforms, to prioritize and elevate the user experience. Now, we can view our technology needs with respect to the North Star of digital transformation—the user experience. If a technology contributes to prioritizing and elevating the user experience, then we may need it. Otherwise, it may not fit.

Still, we are not there simply because we have a prescriptive definition of digital transformation. The key become how the prescription is used, that is, how it becomes actionable. Culture is an important driver (once more, those dang human beings!) The emphasis on prioritizing and elevating the user experience becomes a company or organization-wide imperative.

This begins at the very top:

The CEO and Board Members need to systematically focus on how the company or organization is prioritizing and elevating the user experience. The same is true for the senior and junior executives, employees at every level, salespeople, admins and HR. This is equally true for the partners, suppliers, vendors and distributors. And, of course, user feedback is critical. Now, everyone across the entire value chain has the same focus—prioritizing and elevating the user experience. And through this complete focus, digital transformation occurs as technology is the enabler of many of these initiatives. That is, technology remains a How, but a very important part, of the big picture of digital transformation.

The emphasis on prioritizing and elevating the user experience needs to
become a company or organization-wide imperative.

Can you imagine? The big picture of digital transformation across a company or organization begins with a simple definition. But, only if it is the correct, prescriptive and actionable definition. That is why a proper definition of digital transformation is so important. In this manner, a definition becomes liberating, as it sweeps aside all other distractions and thereby creates a focus that is empowering and effective. Above all, a definition that always focuses us on the fact that digital transformation is about people, business and their user experience.

And, just to recount, here is the definition of digital transformation:

Digital transformation is the impact on people and business from prioritizing and elevating the user experience (UX), through the convergence of enabling information, social collaboration and real-time connectivity.

Allan Thomas Chiulli is the co-founder of DigElearn, an online digital learning membership experience at www.DigElearn.com and the author of Winning in the Digital Tornado. Both are guides to digital transformation for business and technical people needing to catch up and stay ahead of digital transformation. Readers may take a free quiz to measure their Digital Savvy at www.DigElearn.com.