Schrader Transformational Products

The code behind digital products that are shaping our lives and revolutionizing our economies
1. Auflage 2017
ISBN: 978-3-9818711-7-3
Verlag: Next Factory Ottensen
Format: EPUB
Kopierschutz: 0 - No protection

E-Book, Englisch, Band 00, 184 Seiten, Format (B × H): 160 mm x 230 mm, Gewicht: 470 g

Reihe: Edition NFO

In his new book Matthias Schrader, co-founder and CEO of SinnerSchrader, puts the digital transformation on its feet. Whoever starts the digital transformation at the company has already lost. In the meantime, digital products from companies such as Google, Apple, Facebook and Amazon are conquering the everyday life of users. They successfully penetrate sectors such as banking, insurance, telecommunications, retail and automotive. Many companies are in danger of losing their relationship with their customers. They become interchangeable. Matthias Schrader deciphers the code behind the Transformational Products, with which Google & Co. successfully reshape entire markets. The book also provides a playbook for the successful development of Transformational Products in the corporate context. In the end, it bridges the gap between product development and the digital transformation of companies. Transformational Products turn classic marketing into a legacy and thus from a solution to a problem. The weapons of advertising (promotion), distribution (place) and pricing policy (price) have become blunt. Digitisation is a huge challenge for the product, the fourth P in the marketing mix. The focus on the product as a success factor forces companies to focus on the concrete value-added contribution for their customers.

Autoren/Hrsg.

Schrader, Matthias

Leseproben

Kodak Moments “As one industry after another looks at itself in the mirror and asks about its future in a digital world, that future is driven almost 100 percent by the ability of that company’s product or services to be rendered in digital form.” – Nicholas Negroponte, Being Digital (1995) That binary digits (bits) have certain advantages over physical materials (atoms) is well-established. Nicholas Negroponte coined the phrase “bits vs atoms” long ago in his bestseller Being Digital. The context was clear even then. Bits are orders of magnitude cheaper to process and distribute than atoms. Thus, digitizing processes, business models and products yield returns even if they otherwise remain fundamentally unchanged. But that isn’t how it turns out in most cases because connectivity alters the underlying business logic and change is inevitable. Reducing distribution and transaction costs essentially to zero opens the way to completely new business models. In addition, the marginal costs, such as the additional sum incurred in the production of one more unit of a product or service, also falls to nothing, so digital products are not subject to the laws of scarcity. Once produced these goods can be reproduced any number of times at essentially no cost at all. Seen that way, the internet is actually one great big copying machine. Anyone trying to digitize a business model based on scarcity is up against a fundamental problem. This can only work with products that are not easy to substitute; otherwise the attempt will fail. Today, it’s users and attention spans that are scarce, not the digital products themselves. That is the reason for the power shift within the digital economy to the customer and away from the vendor. All this first became apparent in the mid-1990s when e-commerce began to revolutionize retail markets thanks to unbeatable distribution and transaction costs. However, the products themselves remained basically unchanged. On the other hand, the internet is now transforming the products by placing itself in the center of the product experience, as network effects increasingly become part of the product’s perceived value. More and more products are becoming apps for smartphones. Those that offer the best ? user experience (UX) catch on quickly, reach more users than their competitors and, over time, squeeze them out of the market. The user experience offered by Uber not only beats old-fashioned taxi rides, it can also potentially make owning a car undesirable. The atoms of the car become less important for the product “mobility” than bits represented by the Uber network. Digital products enrich the user through the experience of using them, while traditional products gradually fade into legacy, losing their interface and their customer access. Digitization demonstrates the validity of a new branch of economics called ? service-dominant logic, or S-D logic, which describes all economic activity as a service-for-service exchange in which the activities people want done for them represent the source of value and thus the purpose of exchange, not the goods, which are only occasionally used in the transmission of the service. In other words, the value for the consumer does not depend on the product itself but on its? utility, which is something created by the customer. The service is the product, and it can be reproduced much more cheaply and efficiently than atoms. Digital services can also be improved and upgraded much faster than physical products. Essentially, a digital service is just software, and software innovation cycles are naturally much shorter than those for hardware. Amazon updates its software during peak times more than 1,000 times an hour. Software updates are not only faster than exchanging hardware but also add new value to the hardware. In every automobile it produces, Tesla already installs the hardware which will one day enable their cars to drive themselves, even though the necessary software isn’t available yet. They plan to offer autonomy later as an update for which, of course, they will charge extra. ? Functions-on-demand are the strongest indication we have that the paradigm shift from atoms to bits is already well under way. Without software, hardware is progressively declining to offer zero value. Another factor that is contributing to this obsolescence is virtualization. In this case, hardware is completely replaced by software which makes more efficient use of physics. The hardware itself is increasingly being moved to the cloud. In his bestseller The Innovator’s Dilemma, published in 1997, Clayton Christensen was first to point out this obvious contradiction, namely that it is smarter for companies to concentrate on their most profitable customers and products. It is better, he argued, to ignore disruptive technologies if they do nothing to better satisfy the needs of their key customers, or that do not fit their current business model. New technologies, it turns out, are often only marginally superior to existing ones, and often, they may prove inferior. That’s why some new technologies only enter the bottom of the market or exist in expensive niches. It’s hard to predict how this will turn out. In the digital world, a multitude of parameters – processing power, storage capacity, bandwidth – play a role, with each evolving exponentially. Each generation is twice as powerful as its predecessor, and since each new technology basically starts at zero, the hardest step is the very first one – from Zero to One, as Peter Thiel, one of the founders of PayPal, wrote in the book bearing that title. Systems that are subject to exponentiality grow slowly at first. It takes 10 doublings to reach a thousand, but then things start happening extremely quickly. Another 10 doublings, and you reach a million. Another 10, and we are suddenly talking billions. However, that is just theory. In the real world, a bunch of factors combine to slow development down: saturation, for instance, and disruptive competition. Technological progress alone does not make robust enterprises. Andy Grove, the co-founder who turned Intel into the world’s most successful manufacturer of computer chips, was right when he titled his management bestseller Only the Paranoid Survive. As long as a product and its business model work, the pressure to transform is fairly limited. Big companies are especially good at systematically and incrementally improving products and business models. For decades, Kodak was a perfect example. It always spent loads of money on R&D, ran huge laboratories and invested heavily in innovation, but in the end, it was swamped by digitization which made its chemical film business obsolete. The old ways simply worked for too long, despite the fact that Kodak succeeded year by year in making its product better and better. Kodak’s rejection of digital cameras was not necessarily based on arrogance alone. Neither the company nor the people working for it were stupid – quite the opposite because it’s usually the smart people who seek to find out what will work and what won’t. But when Kodak asked its customers what they wanted, they got answers like: “We want a film that produces even brighter colors, can be processed ever faster, and is even more impervious to the kinds of changes in lighting that frequently occur in photography.” Kodak was very good at improving these properties in its products over time and customers, after all, were unable to imagine that taking pictures could be done any other way – with the help of digital chips, for instance. And, at least in the beginning, digital pictures were dramatically inferior to chemical photographs which were the result of processes refined over decades. Old products are generally superior to disruptive newcomers pushing in from the sidelines, at least when they have reached their zenith of development. The first commercially available digital cameras had a much lower resolution than a single-lens reflex camera using traditional film – just as electric cars are inferior to internal combustion models in terms of range and price. YouTube videos used to be much grainier than television: they jerked, the screen was a lot smaller, and the picture quality was dismal. Over time, streaming video eventually gained the upper hand over broadcast TV. Digital products have a big advantage: The infrastructure on which they are based can grow exponentially, as we will see in the next chapters. This allows them to profit from the so-called “network effect”, which opens up a whole new dimension of benefits. Gordon Moore, another co-founder of Intel, forecast way back in the 1960s that the density of the transistors in integrated circuits would double every 12 months or so. Known today as Moore’s Law, this principle still governs progress in the digital world, even if for practical purposes it has slowed down slightly, now doubling only every 18 months on average. This means that while a standard microprocessor will become twice as powerful, the price will remain the same. The exponential growth of computer power also leads to a dramatic drop in price for processing, storage, sensors, and bandwidth. What we call the Digital Age is really the Age of Connectivity. Thanks to falling prices networks could be extended from big mainframe computers to more personal ones and then to smartphones and soon will incorporate just about everything through the ubiquitous ? Internet of...

Über Autor(innen)

Schrader, Matthias
Matthias Schrader is one of Europe’s digital pioneers. He founded digital marketing and advertising agency SinnerSchrader in the mid-90s and began to develop e-commerce solutions for startups like Intershop, Ricardo and buecher.de, enabling them to go public earlier than expected. In 1999, SinnerSchrader issued a public offering of its own and was one of only a handful of fledgling companies that survived the so-called “new economy” and actually emerged strengthened by the experience. In 2006, Schrader founded the NEXT Conference which has become the leading symposium for digital transformation in Europe. Today, the author, with his team of more than 500 consultants, designers and software engineers, continues to assist many large DAX index companies to develop cutting-edge digital products. In February 2017, the worldwide management and technology consultancy Accenture announced it was taking a controlling interest in SinnerSchrader for a nine-figure sum.