4.4 That Said, Nothing Digital Without its Physical Counterpart
Pure software products are known to scale very well. However, as soon as there is a physical product involved, things get more complicated.
This leads to the following aspect, which is often neglected when discussing Digitization: Apart from software‐only products, there exists nothing exclusively digital without an analog counterpart. A promise digitally made by a merchant must be delivered on in the physical world. A physical object has to be produced and must be physically brought to the customer, a promised service has to be executed in the real world. The digital promise made has to match its physical realization. Otherwise, the customer will be disappointed by the seller.
4.5 Market Places Unleashed Not Offering Final Products, but Testing Demand
During the old economy, different products were in store the customer could choose from. He/she was only able to decide which standard product he/she wanted to buy. Today, we experience a new economy with market places being unleashed.
The customer is market places’ new focus point that everything centers on. Market places hence have become customer centric. This also created completely new interfaces between a customer and a market, where user experience became a dominating factor. Customers must be addressed and be inspired. They must feel a certain urge. This market does not sell a finished product any more, it makes its sales way earlier in a product’s lifecycle. That market place sells enthusiasm for a product, creates new needs on the customer’s side. If necessary, entire new products are developed based on the customers’ desires and requirements.
4.6 Create Curiosity
The digital world is in a state of constant change. Structures dissolve and reassemble to new patterns. Novel devices, gadgets, concepts and applications are offered in high frequency.
People find themselves spellbound to their devices and different types of media. Distractions everywhere and at any time. In order to attract customers’ attention, sellers have to create extremely strong curiosity.
Take “Bibi’s Beauty Palace” as an example. The young German vlogger, born 1993 in Cologne, published her first video on YouTube on December 2nd, 2002. In 2015, she had 2.5 million followers and more than 450 million views of her videos focusing on the topics of beauty, lifestyle and fashion. She reaches to young girls mainly.
Literally without any financial investment, she gained unbelievable numbers in coverage and popularity, only by means of the Internet. It would take decades or even centuries for any naturally grown company to achieve the same. Coverage simply explodes here. Not long ago, such numbers used to be exclusively reachable by big media corporations sharing expensive cable or satellite bandwidth with each other. Today, everyone can become such a media station. Now that is “unleashed”.
4.7 Customer Interfaces Are A‐Changing
During the days of the old economy, the product itself used to be a company’s contact point to the customer offered by a merchant. The client entered a store, had a look around and talked to the person at the counter about what he was about to buy. Today, that “guy behind the counter” usually is a computer system, with an analog system behind it. It simply cannot work without the latter.
However, during the buying process, only a digital interface supports the decision to buy or not to buy. This leads to a completely new sales process. Buying interest is triggered by digitally distributed media. If the online buying incentive fails, however, the purchase will not be made. So, the desire for high coverage is accompanied by the need to have several sales channels being functional and successful. High coverage of these channels will then boost sale numbers.
4.8 The Perfect Offer’s Triad
There always is a triad that has to be taken care of for correctly positioning a product during sales and distribution. First, one has to succeed in creating needs. The customer should be brought to the following insight: “I did not even know this thing existed, but now I want it.” This is a hard task, especially if a product is completely new. The potential buyer does not know it yet and is not used to its function or appearance. Also, until now he has done well without it. As an example, let us have a look at the InfoGates terminals at Munich Airport. Passengers see the video chat to the call center and wonder: “Is there a person sitting in that thing?” They press a button and get a video connection to a human being, and they just did not expect this to happen. Plus, until now, traveling used to work without such technology. People might have reservations and fear of contact. So the provider of such technology has to create acceptance. Second, the digital world is a rather complex one, so every new product must be convenient and easily operated. Customers should be able to understand and affect a new product right away. If rejected by the customers, the product cannot successfully be placed in the market. Finally, the new product’s vendor needs to have a good estimation for the price tag put on it. Customers want to have the impression that they get something of adequate value in return for their money. This might be a small perception only, however this perception is crucial. The price must be considered fair, and at the end of day the customer does not want to pay more for a product that he would have paid somewhere else for a comparable piece.
The price might even vary in real‐time. The right, individualized offer depending on the customer’s current situation must be made. This situation and context must be analyzed in real‐time. The correct target group for a certain product must be analyzed and brought together. One has to find out who belongs to that group, who has a need for the offered product, and who is able and willing to afford it. If you will, you need a flock of customers, as humans are herd animals. Customers hence seek and trust other customers’ experiences in form of product reviews and buying recommendations.
4.9 If Something Performs, It Performs Well
Today, if a product is a success, it becomes a real big one. The speed of the Internet can lead to vast propagation in almost no time. In the optimal case, huge amounts of response and awareness are created, letting a (small) idea become a big deal.
As an example, have a look at Pokémon Go. Developed in Australia, the free‐to‐play mobile game hit the App Store on July 6th, 2016. It uses the player’s location data and smartphone camera in order to enable real world interactions such as Pokémon fights as well as catching and trading of the popular virtual creatures. The game was officially presented in North America the next day. On July 13th, the game’s German version was released, followed by Japanese, Spanish, French and Italian ones. The users’ reaction was phenomenal, creating a massive hype. Millions of people started hunting virtual monsters, making the physical and virtual worlds fuse together. Such digital markets scale very well and supported by social media products spread quickly. The once struggling video game pioneer Nintendo dared entering the mobile platforms – and was back in the game immediately. The cliché of couch potato video gamers vanished and augmented reality put millions of people around the globe under its spell.
On the other side, however, the Internet’s excessive supply also makes it hard to get attention. The app stores host millions of applications, and only a tiny number are actually being used on a regular basis. Customer attention is split between too many new ideas and business models, a majority of which hence must fail.
4.10 Locally or Globally – How to Roll out a Product?
Software products are easy to roll out. However, platform development is expensive, let alone bug fixing, patching, extending, testing, optimizing and customizing for different interfaces, operating systems and device types.
Yet platform development only pays off as soon as there is a big enough user base. Sales and distribution are hence a crucial factor. “I need users, users, users!” So, the following questions come up: “How to do the roll out for my new platform? How can I reach the
market share I need?”
The more the merrier: The more a product receives global acceptance, the more people can be reached and the higher is the chance to get attention. However, customers behave differently in different regions, industries or business sectors. Asian markets have to be addressed quite differently from European or American markets.
Entering a market must be conducted in a context‐dependent manner. The market place itself can be reached “anytime, anyplace and through any device”. Yet there are local and global restrictions. There are different languages I have to use for successful communication. English for the English speaking countries only, French for the French speakers and Japanese for the Japanese. When addressing people using a language they do not understand, I will not be able to reach them. However, market places can be constructed to support such aspects, e. g., switching languages depending on who comes to the market. Likewise, products that are globally available must be localized. That is the only way to achieve economies of scale.
4.11 Real‐Time Feedback
The Internet offers another huge advantage for providers: It has real‐time response and feedback. So the provider is able to learn extremely fast what customers think of his product. When using a digital distribution channel reaching millions of people, one can see if a product will perform or not within a few hours. Success can be monitored immediately. Digitization enables real‐time feedback and control loops. But the provider, his marketing and sales departments must be prepared for this and react fast. In earlier times, test runs were conducted over several months. Then the aftermath analysis was done, and one could see what is working or not. Valuable time was lost. Today, you know what works the same day. There might remain some hope that numbers improve, however the customer behavior is representative even from the very first day. So in the age of Digitization, reacting to customer feedback extremely fast is key.
4.12 Battling for the Best Start‐Ups
Start‐up projects are highly interesting, as no one knows where the journey leads. Future trends cannot be predicted. Nobody can estimate how much attention which thing will receive. The market cannot be foreseen, ideas have to be given a try.
Start‐ups are free to try out new things. There is plenty of money in the market to do just that. An innovative idea might fail, but not being a grown brand a start‐up company has no reputation to lose. They simply have no reputation at all, yet, instead they are trying to build one. This is why they can cope with the fear of failure more easily than existing companies. Quite honestly, what is at stake? What is the worst thing that can happen? The project does not grow, it fails. It might even crash. This however doesn’t prevent another new idea to be developed. If a grown company fails, however, that is a real problem. Existing sectors and jobs might be affected. Nothing like that can happen to a start‐up, so this makes them quite attractive.
Start‐up projects thrive on establishing new business models. It’s not in their responsibility to redesign and improve existing products without taking any risks and without making any mistakes. Their goal is to create completely new business models, and they hunger for success.
They can work under fewer restrictions and obligations. Injecting a new idea into a grown and rigid corporate structure takes much longer. And it is way more complex, as there are hundreds of obstacles to overcome. Executives and managers who have faith in the idea must be found. Preserving and protecting existing assets are essential parts of a grown corporate’s creed and mindset. Also, a ready business case must be presented first. Introducing new models into an established corporate structure is a much slower process than doing the same in a young company. In a start‐up, you simply start with a new topic. Things happen faster. The founders invest all their power and resources into the project.
For a large company, it is thus easier to try out a new idea within a start‐up – or buy a successful one – than to build an innovative product far from their own core expertise themselves. With the potential benefit for a large company being so high, start‐up success rate being so low, and so much money being out there, real competition for successful start‐up business models can be observed.
4.13 Digitization Duality
Digitization changes our lives in two aspects. On the one hand, it offers complete automatization and efficiency. Digitization automates everything that can be automatized – including cognitive systems that automate our thinking.
On the other hand, automatization leads to previously unknown types of services, products and business models. This creates a battle for reaching customers on a specific sales channel. More and more providers are competing for one and the same customer. This will eventually lead to the situation that the customer concludes: “I do not want to see ten different merchants making me offers anymore, I want to have one personal assistant who knowsabout my preferences, behavior and interests and that uses this knowledge to choose what I really want. Pretty much like a travelagency agent, who takes care of my journey including flights, hotel, rental car, train‐to‐flight and lounge access as well as travel and cancellation insurances.”
4.14 The Bottom Line: Deploy or Invent New Business Models
Start shaping or be shaped. The high velocity that our market places evolve with compels every entrepreneur to keep pace. Idleness means downfall. Only those able to reinvent themselves over and over again are able to compete. Every provider of goods or services is forced to launch new business models and innovations.
Digitization has made the world smaller. Everyone can communicate with everybody else. And compete with everybody else – this made everyone a potential competitor. But the world has also become more complex, so everyone needs everybody else as a partner. I can build my own channels to reach my customers or use my partners’ channels. I am literally forced to join forces, as partnerships will let me grow. That is just how Uber or AirBnB did it: They created an ecosystem and shared it with everyone. In this business model, the partners earn money as you earn money. And it is so attractive that many partners lined up.
There is no more market place that I have to go to. An unleashed market place is everywhere. Any business can explode or be suffocated by others. Attracting customers to my own product is hard work and art at the same time.
Today, the market place with all its products comes to me as a customer. It is always there, at any day or night time. It pervades my routines and daily life. It is the Internet. As soon as I am online, I am at the market place right away. That market place is amorphous. It’s moving. And I have to move with it.
Part III
Digital Society
© Springer-Verlag GmbH Germany 2018
Claudia Linnhoff-Popien, Ralf Schneider and Michael Zaddach (eds.)Digital Marketplaces Unleashedhttps://doi.org/10.1007/978-3-662-49275-8_5
5. Preface: So Far, so Bad – the Complexity-Fear Dilemma in Cybersecurity and Its Lesson for Digitalization at Large
Sandro Gaycken1
(1)ESMT, Berlin, Germany
Sandro Gaycken
Email: [email protected]
The new waves of the ongoing digital revolution are certainly of high importance to everyone. New markets are created in a highly dynamic fashion, with the industrialized West and its backbone of technology manufacturers undergoing fundamental changes in the coming years, and new products flood our lives, whether directly as consumer goods or, a step before that, as baseline technologies, infrastructures, production machinery, new cars, new drug pumps, new reactors, parts of our formerly dumb and blind environment of “old tech”. In sum, businesses and technologies in Germany and Europe are faced with enormous options for change – and their according sets of opportunities and threats.
Yet while everyone agrees that something great and, in a business sense, oceanic is under way, the question whether we will master this change and benefit
from it, economically and individually, is somehow open. All commercial benefactors from industry captain to startup hipster agree, of course, that they do or will master this new surge in digitalization. And most of them, to be fair, try hard. But is it really enough? And do they try in the right way?
These questions are very hard to answer. Success is difficult to measure, at any rate, and many paradigms are young and technically inasmuch as commercially still in their infancy. However, we may be able to learn some lessons from other fields of IT with more history to them.
One such field is cybersecurity. The insecurity of computers is known for quite some time, and Germany has been part and parcel of the games surrounding the attempts to generate cybersecurity (or IT‐security, as the old folks say). We have had our share of attackers, of technologies and policies, of responsibilities and laws, of small and medium IT‐security companies, of research, and of larger government and large enterprise units concerned with this problem. We know of terrible risks, like mass surveillance, attacks prepared for nuclear weapons, or SAP‐outages at outraging costs of 22 million US‐Dollars per minute. We even have one of the oldest federal institutions in this field, the Bundesamt für Sicherheit in der Informationstechnik (BSI), devising and implementing laws for more than 20 years now.
A clear set of conditions, specifications, powerful actors, options, threats, opportunities. So did we secure our computers? Did we maybe even generate a market out of this huge opportunity? How did we fare?
Digital Marketplaces Unleashed Page 6
