If you believe, as we do, the axiom by personal-computing pioneer Alan Kay that “context is worth 80 IQ points,” then the first rule to building new killer apps is to understand technology context for the next five to ten years.
The stakes are enormous. A generational change is happening in the technology industry as game-changing companies like Facebook, Twitter, Square, Palantir and Dropbox mature. Even more significant is the transformation that new technology will drive in other information-intensive industries. Every such industry is up for “reimagination,” to use a term popularized by Mary Meeker, the Kleiner Perkins venture capitalist — huge market share and market value are being thrown up for grabs. By Meeker’s estimate, the market value of just the top 10 information-intensive industries is more than $36 trillion.
This transformation represents enormous opportunities for both large companies and start-ups. If you don’t understand the context, you’ll wind up playing catch-up—the vast majority of large companies, for instance, didn’t understand even four or five years ago that they needed to start developing apps for mobile devices, and they’re still scrambling. If you understand the context, you give yourself a chance to lead, maybe even dominate.
As the Google driverless car is demonstrating so dramatically to those in the auto world, you have to not only keep a handle on all the traditional forces within a given industry but also come to grips with six technological megatrends: cloud computing, mobile devices, social media, cameras, sensors and emergent knowledge.
Let’s look at these technologies from the vantage point of the opportunities and challenges they represent for business at large, beyond the providers of the core products.
1. Cloud computing
The implications of cloud computing may not seem profound. Does it really matter whether you run an application on your laptop or in the cloud?
To appreciate the business implications, look at the invention of the electronic spreadsheet in the late 1970s. It was just a more efficient way of doing something that could be done by hand—an idea that came to Dan Bricklin because he was tired of doing so many calculations while at Harvard Business School. Yet the spreadsheet contributed to — some say caused — the appearance of corporate raiders and leveraged buyouts in the 1980s. Suddenly, lots of sharp analysts could consider limitless possibilities just by changing the inputs in a few cells in a spreadsheet. The surge in creativity let people imagine ways of reconfiguring companies that hadn’t previously been considered, then use their numbers to line up financing and reshape the world of business.
While cloud computing enables vast economies of scale and much greater simplicity for the users, letting them buy processing and storage capacity as they need it, the more strategic issue is that cloud computing allows for greater flexibility, lower start-up costs and faster cycle time for innovative ideas.
A client of ours, for example, was recently stymied when his technology department estimated that an innovation idea would require a $12 million technology investment before prototyping could begin. That estimate was prohibitively expensive. But a little digging uncovered more than adequate cloud-based resources for less than $15,000 a month, with the option to scale up as the experiment unfolded. The effort went forward without a hitch.
The guiding principle in thinking about cloud computing: Foundational elements of information technology will become much cheaper and easier to use. How can you use that new flexibility to innovate and change your business as fundamentally as the electronic spreadsheet did?
2. Mobile devices
Mobile devices are not smarter phones; they’re platforms for the Internet and apps that users can take with them wherever they go.
Throughout the world, more people have mobile devices than have electricity or access to safe drinking water. Ericsson predicts that by the end of the decade 50 billion devices will be connected and communicating with one another. Roughly 20 percent will be cell phones and tablets. Some 80 percent will be devices that talk to one another but not to us humans.
This is exerting a huge and growing force on business at large. Research by Deloitte found that smartphones influenced $159 billion in sales in 2012 alone and predicts that figure will rise to $689 billion in 2016, primarily because of showrooming. That will be one-fifth of retail sales. A client, one of the largest mall operators in the world, assumes that a majority of shoppers are wandering its malls armed with mobile devices.
Mobile apps will continue to improve and proliferate. They’ll also move into profound new areas. What happens when your phone is linked to sensors in your body and sends a steady stream of data for your doctor to monitor?
The guiding principle in thinking about mobile devices: Every person and every device will be able to talk to every other person and device, instantly and at zero cost. You have to figure out how you can turn this level of efficiency into an asset, rather than a liability, for your business.
3. Social media
Social media would seem to be heading toward maturity. Facebook, for instance, already has a billion users, and a fierce debate is underway about whether it is already passé. In fact, as the proliferation of social media platforms shows, the technology is likely just getting started and could head in any number of intriguing directions.
On possibility is that social sites could be knit together into a social layer augmenting all business functionality. Start-ups such as Zapier and IFTTT are hard at work building such a layer, making it easy to share services between, say, Salesforce.com, Gmail and Facebook.
Such layer could allow, for example, companies to easily link the social networks of their employees into their marketing, sales and service capabilities. Or, imagine being able to leverage customers’ social networks and preferences throughout all interactions.
Research has shown, for instance, that leveraging social networks to nudge and reinforce positive behavior leads to better outcomes for patients with chronic illnesses like diabetes and hypertension.
Another intriguing development is P2P services — as in person-to-person, going beyond the traditional B2C (business-to-consumer) and B2B (business-to-business). Already, sites such as airbnb.com and RelayRides.com are trying to organize people who want to offer services to other individuals—airbnb coordinating rentals of rooms or homes and RelayRides helping with car rentals.
Every company should think hard about how social media models might endanger—or provide new opportunities for—its business assets and models. The guiding principle in thinking about social media: Customers are talking with one another about you and your products; how should you join that conversation?
From a business standpoint, the growing ubiquity of cameras will create loads of possibilities for understanding customers. Stores will know, for instance, more than just what customers bought. Stores will know what customers didn’t buy, by seeing what they picked up and then put down or by seeing where they paused in an aisle without buying anything.
Cameras will also put power in the hands of customers. They’ll be able to document that disgusting restroom or that surly clerk, and the video will grab viewers far more than a written complaint would. If a picture is worth a thousand words, what is a video worth?
At the same time, the use of cameras will create thorny privacy issues. Just because Big Brother can watch doesn’t mean consumers are happy to let him do so. For instance, police forces could easily issue speeding tickets by tracking how fast the cell phones inside cars were moving, but no one would tolerate that.
The guiding principle in thinking about cameras: Cameras can be anywhere and everywhere. Where should you use them, and how can they enhance your business rather than just expose your flaws?
Sensors are already all around you: the GPS in your phone, the crash sensors in your car, the motion sensors that let you move your character by tilting your phone while playing Cube Runner. Sensors will end up everywhere because they cost almost nothing to add to products.
Some companies will find ways to get consumers to let them monitor products from store through consumption and disposal to see how long products sit on shelves and how they’re used. Other companies will embed sensors that will announce that, say, a dishwasher is failing before it fails, delighting customers and likely changing how repair services are provided. The sensors that are going into homes as part of the Smart Grid will let them monitor electricity use and prices in real time, helping people cut costs while smoothing out major inefficiencies in power generation by utilities. Medical researchers are developing sensors that fit in a contact lens and will be able to monitor insulin levels for diabetes constantly, as well as tiny devices that could be injected into people’s bloodstreams to generate crucial data before eventually dissolving — sort of Fantastic Voyage but without the microscopic submarine or Raquel Welch and the other actors
Several large property and casualty insurers are working on “connected” cars and homes—ones with sensors that generate important information and that can always be monitored remotely, with the owners’ permission. They are feverishly working to understand the implications for underwriting, service, customer relationships and competition.
The guiding principle in thinking about sensors: Almost anything that can be measured and monitored will be. What are the high-value measurements on which you can focus, and how might they transform your business?
6. Emergent knowledge
The more common name for this category is “big data,” and the amount of data is certainly an issue. But the real benefit isn’t the size of the database. It’s the knowledge that can emerge.
President Barack Obama won reelection partly because his campaign was sophisticated about mining its data to identify prospective donors, volunteers and voters. Among other things, the campaign ran 66,000 simulations of the election every night. The Romney campaign also used data mining but suffered an embarrassing failure—the campaign couldn’t identify the right voters to target, the right approaches to use with them, the volunteers to target them and so on. In other words, both campaigns used big data; it’s just that the Obama campaign gleaned real knowledge from it.
Gains in artificial intelligence, combined with these huge new sets of data, let IBM’s Watson computer vanquish the two most successful human contestants in Jeopardy’s history in early 2011. In the business world, Watson-like technology is being used in place of paralegals to scour massive numbers of documents in preparation for litigation and is being applied in some medical diagnoses, among other places. And the spread of sensors, cameras and mobile devices, combined with declining storage costs, makes it possible to capture and analyze all sorts of new information.
The guiding principle in thinking about emergent knowledge: Previously unattainable knowledge is lurking in the data assets of your organization. How can you effectively uncover that knowledge and use it to create better products and improve efficiency, effectiveness and service?
The real context: All of the above
Even with the six technologies that will shape the next round of innovation, it’s crucial to not just look at them individually. They can have rich interactions that create far greater disruptions.
For instance, the Google car is made possible by the interactions of these six technologies. Cameras and sensors generate the moment-by-moment inputs that let software guide the car. Mapping data updated via the cloud and augmented by social media apps like Waze provide comprehensive road, traffic and destination information. Emergent knowledge helps the car get better at driving, both by learning from human drivers and by drawing on publicly available information about where and when accidents occur. The car can also function as a powerful, mobile communications device.
Here’s one more example, just to show that nothing is sacred: Cameras and emergent knowledge may transform professional basketball. Some teams have installed tiny cameras in the rafters and have adapted missile-tracking technology from Israel to follow movement by players and the ball on the court. The teams are now able to do detailed analysis and are learning about the dynamics that lead to good shots or strong defense. The teams that get the analysis right could make the kind of step-function increase in performance that the Oakland A’s made a decade-plus ago and that was described in the book and movie “Moneyball.”
So, both market leaders and entrepreneurs must not only think through each of the six technological megatrends but also imagine a range of potential interactions, including how existing competitors and new entrants might use them to attack and, even better, how to turn new capabilities into killer apps that will let them prosper.
* * *
[Understanding the technology context is an important first step towards building and successfully launching killer apps. It is, of course, wholly insufficient. To understand the other seven steps of the innovation process that we’ve found through our analysis of thousands of successes and failures, see our new book, "The New Killer Apps: How Large Companies Can Out-Innovate Start-Ups."]