Transformational innovation disrupts markets. And in the last 10 years, no device has proven so disruptive as Apple's iPhone.
"The iPhone disrupted 27 business models," said Ray Wang in his afternoon keynote on Day 1 of Host Analytics World 2017. "Probably ten million jobs were disrupted by just that one device!"
Wang's post-lunch speech was filled with exclamations and exhortations, most of them pulled from his new book, Disrupting Digital Business: Create An Authentic Experience in the Peer-to-Peer Economy, and distilled as 10 rules for disruptors-in-training.
1. Digital disruption is about transforming business models and how we engage.
Look at Uber. When Wang asked the crowd how many used the service in the last four weeks, 90 percent raised their hands. Uber uses five of the six technologies Wang identifies as common to disruptors.
"It's mobile via the app, it's social because you rate the drivers and they rate you, It's cloud because the profiles, information, and pricing shows up in one location. It's Big Data through surge pricing, and it's IoT because context and location data is being brokered and sold," Wang said. "The business model drives the transformation; form follows function. The technologies then support your ability to get to that business model."
2. In an attention economy, we move from selling products and services to keeping brand promises.
Digital accelerates business model transformation because we get access more easily. We're all vying for attention, and at the top of the chain we don't just offer a product or service — we make a brand promise and then deliver on it with a prescribed outcome.
Disney is a good example, Wang said, highlighting the company's new Magic Band for automating the experience of visiting a theme park while also collecting reams of data about demand. "If Main Street is going to be crowded with 5,000 people they'll know to bring 10 more shifts into work. They're using data to figure out real demand and align services." And no one waits any longer than they should.
3. New unit cost pricing models enable disruptive business models to thrive.
Data-driven digital business can try experiments at any scale, Wang said, before throwing out a fascinating hypothetical. "Who here would pay a quarter for a sip of Coke? OK, not many. What if I offered you unlimited sips of Coke, anywhere in the world on a Freestyle machine that allows you to mix and match flavors for 2 weeks for $10 ... who would pay for that?"
Plenty more Coke fans raised their hands in response, which is Wang's point. When you have good data about your unit costs, innovation is easier to come by.
4. Data is the foundation of digital business. Every touch point, every click, every digital exhaust is relevant insight.
How and where we're getting the data that provides value is changing. For example, Wang said we should expect there to be 80 billion sensors in place by 2020. Roughly 60% of mission-critical data will reside outside your business by the end of that same year.
Big Data tools are the key to gathering all this information and extracting context. "Insights lead to action, right? We don't need much data to know that blue sweatshirts are always going to sell better in Ann Arbor in September than will red sweatshirts. The University of Michigan in Ann Arbor wears blue while its arch-rival at Ohio State wears red."
Every business exists in context. Having data that provides context allows you to optimize inventory and distribution.
5. If 20% of your revenue is not an insight stream by 2020, you won't have a digital business model.
But it's also bigger. The more data you have and then more you understand about the context, the more creative you can be with business models. To illustrate, Wang described a client that wants to install a sensor on every shower and charge $1 per month for access.
"Sounds silly, right? Imagine if you're a hotel operator and you have 100 rooms. Those sensors can suddenly provide valuable data because water is a top influencer of Net Promoter Score (NPS) for hotels," Wang said. "You know the complaints: the water is too hot, too cold, dripping, the pressure is off ... If you can raise NPS by 1 point you can drive revenue up 10-15%!"
Here, the sensor data is the gateway to raising NPS and unlocking entirely new business models, such as an Uber-style plumber network where a hotel might literally order up service when a shower head malfunctions.
Want to see all 10 ideas and get advice for putting these principles to work as a disruptive digital business? Tune into the replay of Ray's keynote speech for everything you need to know..
Thanks for attending Host Analytics World 2017, and we'll see you in Dallas next year!