Disruptive technologies and the Internet of Things (IOT)

Disruptive technologies

Disruptive technologies are the ones that catch the leader in an industry by surprise. 

These technologies when they enter the market, they do not appeal to mainstream

customers  as they are  low on performance attributes. They do not appeal to the market

leader because  they are low on profit margins. But most of these technologies follow

 Moore’s law and keep  improving at a very rapid rate both in terms of performance as

 well as profits. And before we  know it they become the market leaders. We have seen

 this happen again and again with companies like Xerox (Photocopy) and Kodak

 (Cameras)  in the past and with Google (Search), Apple (Music, Phones, Tablets),

Facebook  (Social Network), Wikipedia (Encyclopedia), M-Pesa (Mobile payments

 and remittances  in recent years. All the recent  disruptions have been riding on the

 internet and mobile technologies. Let us try to understand some of these examples

in a bit more detail and try to see what this might mean to our future.

Birth of the Internet

The internet was conceived by the Defense Advanced Research Project Agency

 (DARPA) as Advanced Research Projects Agency Network (ARPANET). It was

 mostly used for defense and military purposes for the first 30 years. The internet

went public in the 1990’s. It created something similar to the Gold Rush for the first

 10 years when people started using the words like “New Economy” and valuations


 for companies born on the internet went through the roof and millionaires were

 created overnight. By the year 2000 the craziness had reached a peak.  As with all

bubbles, the internet bubble burst and we had the dot com bust during which many

internet companies went bankrupt and many people lost their fortunes. As shown by

 the famous Gartner hype cycle we are now getting out of the trough of disillusionment

and entering into the slope of enlightenment and Plateau of productivity for internet

companies. What follows arestories of companies who are creating the latest disruptions

 in the internet era.

Google (Two Sides Markets, Search, Automatic Cars, Internet Balloons, Robotics, 

Machine Learning)

Google was founded in 1998 by Larry Page and Sergey Brin when they were PhD

students at Stanford University. Their primary product was a fast search engine

 that provided the most relevant results on the internet. They monetized their Search

technology with AdWords by offering users relevant Ads based on what the user was

searching for. This was the use of the two sided market concept where Advertisers

 paid while the users got to use the search engine for free. After search they went into

Gmail, Maps, Chrome (browser and OS). They acquire YouTube (videos), Android

(mobile).

They are now focusing on Automatic Cars, Internet Balloons, Robotics and

 Machine Learning.

Apple (Disrupting Music and Telecom industry. Creating Tablet industry)

Apple first came into the limelight by disrupting the music industry in 2001 with its

 iconic iPod. The iPod soon became a fashion statement and allowed people to carry

1000 songs in their pocket and allowed consumers to buy a single song for 99 cents

 from the iTunes store. This was disruptive because, before the iPod and iTunes came

 along, people could only buy CD’s which contained 10 to 15 songs of one particular

 artist or band. Now people could buy 15 different songs from 15 different artists at

a much cheaper price at the click of a button in a matter of minutes.

Then Apple went on to disrupt the telecom industry with the introduction of its iPhone

 in 2007. The iPhone came with a multi-touch interface and it was a phone, music player

 and internet browsing device all in one. It did all these things in a simple user-friendly

way with a beautiful user interface.

Then Apple created a totally new device and new market with its iPad tablet which

 was released in 2010. Many people called it a bigger iPhone and some people even

 made fun of it by saying that the name iPad felt like it was a feminine hygiene product.

But it was Steve Jobs and Apple who had the last laugh.

Now Apple is planning to disrupt the payments industry with Apple Pay and the

wearables industry with iWatch. Another interesting technology they are working on

 is 3D mapping Laser beam projector system.

Facebook (Social Networks and Viral Messages)

Mark Zuckerberg started Facebook in 2004 when he was a Harvard undergraduate with

 2 of his roommates. It rapidly spread from Ivy League campuses to high schools and

 eventually to everybody with access to an internet connection. Facebook recently

 went mobile in 2012.  The Facebook platform allows users to share experiences like

 listening to music, viewing a photo, reading an article and movie reviews. It allows the

users to share their deepest thoughts, emotions and feelings and it is saved on their

 timeline. It also allows users to discover people, photos, places and interests.

Currently there are 1.23 billion active Facebook users. So a wealth of rich data about

all these users is now available on this platform. The concept of viral

marketing and viral messages became popular because of the ability that Facebook

provides its users to share all kinds of content with their friends and acquaintances.

Facebook is now looking into Virtual Reality, Payments by Facebook Messenger

which may very well change the way we socialize and the way we transact in the

digital world.

Wikipedia (Wisdom of the Crowds)

Wikipedia was founded in 2001 by Jimmy Wales. In a short span of time it became

 the 6th most popular website on the internet with 34 million articles in 288 languages.

It has 18 billion page views and 500 million visitors each month. It is able to manage

 this with contributions from all its users and 73,000 active editors. It is completely free

 with no advertisements. It is relevant as it  keeps getting updates on a regular basis.

Its accuracy keeps on improving as it is reviewed by a  lot of people.

(“Given enough eyeballs, all bugs are shallow” – Linus’ Law as formulated by Eric

Raymond).

In the future Wikipedia may be able to offer us virtual reality tours into the past,

present and future based on the content it accumulates.

M-Pesa (Mobile and Bottom of the Pyramid)

M-Pesa was launched in 2007. It was owned by Vodafone and operated by Safaricom

 in Kenya. It is a fast, secure and affordable payment service to “Send Money Home”

 by SMS. It does not need a Bank account. This was one of the key selling points for

 this service as many people in Kenya at that point in time did not have a bank account.

Annual money transfers using M-Pesa have reached 10 billion USD as of Mar 2014.

M-Pesa made a profit of 183 million USD in 2012.  M-Pesa is a classic success story

 in the Mobile space and highlights the fact that there is in fact money to be made at the

bottom of the pyramid as highlighted by C K Prahalad in his book Fortune at the bottom

 of the pyramid.

Sharing Economy, Collaborative consumption (Uber, Airbnb)

The latest disruption that has come up is something called the Sharing Economy or

 Collaborative consumption. The primary premise behind this concept is that there

 are a lot of underutilized resources and assets which can be put to good use with

 the help of platforms that can match these assets or resources to the right people.

This has led to emergence of disruptive companies like Uber in the transportation

 industry and Airbnb in the Lodging industry.

Internet of Things (IOT)

All the above leads us to the Internet of Things which is the next big wave in technology

 based disruption. As of today the primary devices that connect to the internet are

laptops, mobile phones and tablets. Going forward more and more devices will connect

 to the internet. Cars, Refrigerators, Microwave ovens and many such appliances will

connect to the internet and exchange data back and forth. For example your refrigerator

 will automatically send an order to an online retailer when it is running out of milk,

eggs, and fruits. Your car will send a message to your mechanic to book a time slot

when it is due for servicing or when there is an imminent part failure.

Ray Kurzweil an eminent technology thought leader predicts that by 2029 a 1000

USD computer will have the same raw computing capacity as that of a human brain.

He also predicts that nano computers will be embedded into the human body in the

 not so distant future. Biology and computer technology will merge. This will lead to

some kind of collective intelligence which will govern the Internet of Things.

This also leads to possibilities depicted in movies like the Matrix and Terminator

 series where machine intelligence overtakes human intelligence and machines take

 control and start destroying humans. Since I am an optimist I believe that we can

control this next phase of evolution which will see a convergence of Information

Technology, Biotechnology and Nanotechnology.

The digital divide

One the one side we have the digital haves with their ipads, iphones and wearable technologies. On the other side we have the digital have not’s in many parts of the world like Africa, India, China, and Latin America who are struggling for the basic necessities of life like food, clothing and shelter. In most of the countries less than 10% of the population own most of the wealth while most of the remaining population struggle with a tough daily existence. We are told that this gap will widen further with people who have access to digital technologies having more opportunities to improve their standard of living compared to those that don’t.

It is refreshing to hear about success stories like M-Pesa (Mobile money transfer and payments), Grameen Bank (Micro Lending) and about the potential fortune to be made at the bottom of the Pyramid (C K Prahalad). The bottom of the pyramid consist of 4 billion potential consumers waiting for products and services like M Pesa and Grameen Bank. They aspire to a better standard of living same as any anyone else.

As we have seen from many of the case studies on internet companies like Google, Facebook they have been able to make money on the internet only by doing innovative things like using two sided markets (one side gets products and services for free while the other side pays), Freemium model (you give the product or service for free till you get enough customers on your platform, then you charge a nominal price to make money). Many of these innovations can be very relevant to create business models that are viable and sustainable in Bottom of the Pyramid markets.

I personally hope that digital technologies even though they may increase the gap between the digital haves and have not’s, can at the same time help us to create a world where every person on the planet has access to the basic necessities of food, clothing and shelter. This can only happen with more and more innovations at the Bottom of the Pyramid. If we can have an innovative encyclopedia like Wikipedia which has defied all economic theory and which is growing and thriving on voluntary contributions from its users, we can all be optimistic about our digital future.

How to make money on the internet?

Whether is it music, movies, books or newspapers the underlying theme of all these industries is “Content is King”. The delivery medium may change over time in these industries, but one thing that will always remain constant is the demand for quality content and creative content providers.

If you still don’t believe content is king, then read the article below by Bill Gates who predicted in 1996 when we were still using dial up modems that made those shrill, weird sounds when we connected to the internet. This is when downloads were at bullock cart speed compared to today’s lightning fast broadband downloads. The article starts with a prophetic statement “Content is where I expect much of the real money will be made on the Internet, just as it was in broadcasting.”

http://www.craigbailey.net/content-is-king-by-bill-gates/

What I find interesting though is that even though Bill Gates had this vision in 1996 and strongly believed in it, Microsoft was not able to monetize this vision. It was companies like Google, Amazon and Facebook that were able to monetize on this vision much better than Microsoft. It took a few years for each of these companies to figure out how to make money on the internet.

The main lesson here is that just having vision and predictive powers is not enough. You need to constantly be on the lookout on how to deliver quality content and value to your consumers in a way that they are more than happy to pay for it. This is no easy task as I learnt from my EMBA classes that the marginal cost of delivering content on the internet is close to zero and hence people expect most content to be either free or at a very nominal price.

That is the reason that you will see that while companies in most other industries focus on margins, the companies that make their money on the internet focus on market share and growing the market share at a rapid pace either organically or through mergers and acquisitions. Whether it is Facebook, Google or Amazon most of these companies hardly made any profits in their early days. It is all about becoming the number one player in your space. When you have your customers locked into your platform even if you make very low profits from each customer, the high volume more than makes up for the low margins.

Everybody has been wondering about the 19 Billion USD acquisition price for WhatsApp. When Facebook acquired WhatsApp there were 400 million users on WhatsApp. In one year the number of users have gone from 400 million to 600 million. Facebook already has 1.23 billion active users. So once WhatsApp gets more integrated into the Facebook platform, it can easily have 1 billion users. Even if you charge one dollar per user, that is one billion dollars in revenue. And as we have already learnt, the marginal cost of every additional user is zero. So you do the math in terms of what the profits will look like.

So in summary quality content and high market share are the 2 most important things for making money on the internet. You need to manage your cash flows very tightly till you have enough market share and are able to start monetizing that market share.

The future of Search

Google has become synonymous with Search. “To google” has become a verb. So when anyone raises the question will Microsoft or any other company be able to beat Google in search, most people say it’s highly unlikely.

But it was not so long ago when Xerox had a similar reputation in the photo copying world. Kodak in the world of cameras. There are very few companies who have remained dominant in the information technology industry for more than 20 years.

Based on the history of disruptive innovation in the information technology industry, Google will most probably be disrupted by some company that is as yet unknown and flying below the radar. A company that can leverage nano technology, information technology and biotechnology. Such a company will have the necessary skills and knowledge to create human + machine interfaces which can allow the human brain to seamlessly connect to all the knowledge and information stored in the cloud.

Hollywood has been very good at creating movies which depict possible technologies of the future. One such movie that anyone interested in technology should watch is “The Matrix”. In this movie there is a scene where the hero Neo asks the heroine Trinity if she can fly a helicopter. She says not yet. Then she asks for an instant download of instructions to fly the helicopter directly to her brain. She gets the download in a matter of 5 seconds and then flies the helicopter.

Check the link below to see this particular scene to get a feel of the kind of possible technology I am talking about.

https://www.youtube.com/watch?v=6AOpomu9V6Q

This is the kind of search and knowledge acquisition technology that may very well be possible in the next 20 years. The company that comes up with this kind of technology will be the one that will replace Google.

Google’s mission is “Organizing the world’s information and making it universally accessible and useful”.

The company that will disrupt Google will connect your brain directly to the information that is organized by Google.

If you are interested in transformation through technology below is a link to a Ted talk by Ray Kurzweil who is a technology thought leader that I respect and have been following for some time.  You many find this interesting.

http://www.ted.com/talks/ray_kurzweil_on_how_technology_will_transform_us#

The Digital Nation

Every person on the planet who has access to the internet can become a global citizen today. Facebook has been able to achieve in a span of 10 years what politics and business could not achieve for hundreds of years. All you need is one user id and password and you become a citizen of this Digital Nation called Facebook which has 1.23 billion active citizens as of today. Only China (1.35 billion) and India (1.25 billion) have more citizens than Facebook. It has helped us overcome time and space and connect to people on the planet in real time. Just imagine the potential of what Facebook could achieve in the next 10 years compared to what it has been able to achieve in the past 10 years.

Now that I have shown you the dream, here is a reality check on Facebook. Below are 2 major roadblocks because of which many people don’t want to be part of this digital nation or even if they are part of this nation they are very passive and not active citizens.

1. People share all kinds of crap on Facebook. So instead of becoming a place where people can improve the quality of their lives and communities by sharing good quality information and knowledge you see people following their own agendas and polluting the digital nation with garbage which turns many people off.
2. Privacy is a very big concern, as there have been many cases where a lot of private information that people would not like to share becomes public knowledge because they have accepted all the default privacy settings that Facebook has.

Below are 2 points Facebook and its digital citizens need to keep in mind if they want to realize their full potential to be the best nation in the world.

1. To quote Spiderman’s uncle Ben “With great power comes great responsibility”. Facebook needs to put in a lot of efforts to make sure it does not become an arrogant bully and big brother who does not care about its citizens.
2. When all is said and done a nation is as good as its citizens. In fact every nation in the end reflects the quality of its citizens. That is why at least in a democratic system, you get the government you deserve.

I sincerely hope that Facebook can achieve its full potential, so that every person on the planet would want to be an active citizen of this digital nation.

Data Quality & Critical Decisions

I was very influenced by one quote that I read from Narayan Murthy (founder of Infosys) which goes as follows: “In god we trust. Everybody else has to bring data.” I think this is true for all individuals, organizations and nations. All the critical decisions in the life of an individual, organization or nation should always be based on hard data.

That brings me to the next question. How good is the quality of data on various subjects as of today?

Since information technology came into the picture, the quantity and quality of data has been improving at a rapid pace. But we still have a long way to go. Unless we have standardized data formats for all the critical data elements, we can never get accurate data from all data sources. It is very important that data from various data sources can be complied in a single data warehouse, so that it can be summarized, sorted, filtered in a way that helps us get accurate information which helps in making the right decisions.

I still see that when two partners in a supply chain try to share data, it is not yet plug & play technology. It takes quite a bit of time and cost to achieve seamless integration between two systems and two partners in a supply chain. Unless we are able to achieve plug & play integration between various entities that participate in the global economy, we will struggle with good data which can help to take the right decisions when it comes to critical policy matters in the fields of health, education, business, economics and politics. This has major implications for the future of our planet.

The use of XML standards for standardization and sharing data is a great start and all of us need to play our part in making sure that we help to standardize any and every kind of data that can be standardized.

While security and privacy of data are legitimate concerns and a lot of attention has been given to these points recently, I see that many people have not yet realized the potential of data format standardization, so that data can become actionable information which could help us avoid costly mistakes on critical policy matters.

These are some thoughts that I had on a leisurely Sunday morning which I thought worth sharing with you. Do let me know your thoughts on this topic.

The Apple Macbook

After listening to and reading lots of reviews about Apple Products on the Net, I finally decided to check out for myself, what is it that makes Apple report profits while most other companies worldwide are reporting huge losses and laying off people in the middle on this huge global recession.

So I got my first Mac book. Its the aluminum 13 inch one. Since I work in the Information Technology industry, I have always been interested in understanding how to make products and services intuitive and easy to use while hiding all the complexity in the background. And after using the Mac book for the first 2 weeks I have come to love Apple for the following:

1) Beautiful Design
2) Fast, Intuitive software and hardware
3) All the technological complexity is hidden from the User


I have also been using the Ipod for the past 5 years. One word describes it best. And that word is "Simplicity". I am definitely getting a feeling that by end of 2009, I am going to be a hardcore Apple fan. Maybe I already am one.

Any of you who are thinking of getting a new laptop, do check out the Macbook as one of the possible options. For people who are not very techno savvy, getting used to the Mac book may take 2 to 4 weeks. But I would definitely recommend investing this time in learning how the Mac works. It will be time well spent.