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The Challenge of Pricing Disruptive Technologies

This month, I attended a couple of entrepreneur and investor events.  The term “disruptive technology” appeared frequently and prominently – as it should.  What figured less prominently was an understanding of how to capture the value of disruptive technology in the form of price.

If you’re disrupting, you’re delivering value differently….often enabling value differently.  You need to be paid for your creativity…That’s the market imperative. After all, it costs money for a company to build new, highly differentiated value…and the price is how that all gets paid for.

My Lens on the World: Value-based pricing.

Full disclosure: when I call myself a sales, value, and pricing expert, I mean I am an expert on helping companies achieve win-win, value-based pricing.  Customers use price as a comparison point against perceived value. If I can help your B2B salespeople regularly build enough value, customers will have stronger buying preference, at higher prices.

I’ve heard several good definitions of value, but for our purposes, I’d like to use this one:

Value is the desirability of outcomes your products or services deliver to a customer.

This definition gives insight into how value forms and builds in the customer’s mind.  It guides to sales and marketing organizations working to build – then objectively price – a disruptive innovation.

Outcome-based Value Analysis.

Customers don’t buy your offer; they buy their own outcomes/results.  What they are willing to pay for your offer is how strongly they desire results.

Human buying behavior around price is pretty consistent.  Customers:

  1. Compare noticeable differences between options (almost always the top two).
  2. Translate differences into personal and business outcomes. Any outcomes not envisioned are ignored.
  3. Assign value to all outcomes. “Assigning value” can be gut feel, emotional desirability…all the way to a formal analysis of business impacts.
  4. Compare the value of outcomes to the relative prices, and buy according to this calculation

The good news:  This is how customers operate intuitively. It’s no work at all to get a customer to engage in this mental process. Did you ever pay more for gas because a station is easier to get to? How much work went into getting you do decide?

The bad news: contrary to what “rational buyer” economic theory predicts, customers only think as hard as they need to (read those four steps again to see how mental shortcuts could form). It’s not particularly hard to force more detail on their process, it simply takes purposeful selling and marketing effort at the right time.

For established products, salespeople must either walk a prospect through more detail in analysis…or hope that the customer makes perfect value assessments unguided. Hint: they almost never do. I have a secure income helping “established product/service” companies sell at better prices.

For disruptive products, value-building must be even more purposeful. Each customer is walking an unfamiliar path.  They require more detailed guidance all along the way: comprehending novel outcomes, envisioning those outcomes for themselves, belief/confidence in realizing outcomes, valuing outcomes, and more.

Penetration / Skim pricing: a Myth?

The Internet age has introduced us to the idea of buying profitless market share and figuring things out later: penetration pricing is the new false idol of business.

You can — and people do– price disruptive technology for profitable penetration.  The key:  be in a winner-take-most (WTM) market.  Only buy market share in WTM markets….and either have deep pockets or patient money.  Any company bringing a disruptive offer to a normal market is at risk with a penetration pricing strategy.  You’re far more likely to end up as roadkill than as the next Amazon.

As long as your price is less than your value, the idea of charging less to sell more is a myth (the topic of one of my most popular posts ever).  The demand curve you learned in econ class is based upon several unrealistic assumptions – assumptions made so that the math works more easily, not to explain real-world buyer behavior. For one thing, the math assumes little to no differentiation.  In contrast, the whole point of disruption is differentiation.

Pricing Is Profit

Regardless of the price you charge for a piece of business, your production costs don’t change.  That means that an additional price dollar is a bottom-line dollar.  Conversely, every dollar you don’t charge (or discount away) is a profit dollar you just donated to a customer.

Those profit dollars?  You need them for disrupting, innovating, customer education, etc. Whether you do subscription pricing (or its economic cousin, leasing), or whether your offer involves Uber-style distributed asset ownership (or its economic cousin, franchising)…understanding who receives what outcome/value is the key to a successful pricing strategy.

You Can’t Price The Value You Haven’t Built

If your disruptive offer generates value, you need to have a system for causing that value to come into being in the customer’s mind.  In consumer markets, this might come via media-delivered content.  In a complex/consensus B2B environment, the mix will shift to include more human-to-human value-building customer conversations: that’s my thing.

Disruptive Change and Value

Value only exists in a customer’s mind.  Value for something disruptive often involves a little more commercial teaching work — getting a customer to wrap their mind around a novel outcome.  Unless the outcome is unusually intuitive, that takes some sort of value building communication. That value building is rewarded by a higher, value-based price.

I hope this helps.  If you’d like to talk in greater depth, please feel free to reach out. Also, I’d appreciate your liking, commenting, or sharing with your networks, or with colleagues who it might resonate with.

To your success!

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5G Entrepreneurs Creating Billion-Dollar Businesses

Within the next five years…

New multibillion-dollar businesses will appear that didn’t exist before due to 5G wireless technology. Because of this, many industries will either be agile, reacting to an ever-increasing number of 5G innovators disrupting their industry, or they will be anticipatory innovators and use the predictability of 5G capabilities to become the disruptor.

The first generation (1G) of wireless came with the introduction of cell phones constrained to phone calls and high-level executives. The second-generation (2G) gave us better call quality for wireless phones and offered a new capability for text messaging via SMS. The third-generation (3G) facilitated mobile internet browsing and early video calling.

Most recently, 4G brought us useful multimedia networked computers with media-rich streaming applications like Snapchat, Instagram, Facebook, Netflix, and more.

Up next is 5G.

This generation of wireless technology is already being deployed in major cities in the U.S. and other countries. Qualcomm, Ericsson, and Broadcom, as well as network providers AT&T, Sprint, and Verizon, are all putting in maximum effort, with mobile device manufacturers starting to launch their first 5G-enabled devices.

While consumers have become jaded to the 5G terms as seen in commercials, there are many consumer and business implementations of 5G to be excited about. Once deployed and fully operational, 5G would essentially be the solution to deliver complete digital connectivity from the tip of the carrier network and essentially be the death of cables in homes and offices alike.

As it stands today, 5G would function as a set of simultaneous revolutions, all of which must function without any trouble whatsoever, in order to provide the speed and connectivity it boasts. Some hiccups actually go beyond technological functionality and spill into business and social conflicts:

  • Unified Carriers. 5G wireless would essentially place companies like AT&T, Verizon, and the combined T-Mobile and Sprint in competition against Comcast and Charter Communications for services. 
  • Remade Landscapes. 5G allows for smaller transmitters that consume lower power, with smaller 5G transmitters covering much smaller service areas than those typical 4G towers. A carrier would need about four hundred times more than we currently have, camouflaged in urban areas. 
  • Restructured Global Technology Economy. Upon implementing 5G, areas such as Scandinavia where Nokia and Ericsson reside would become the primary hub for telecommunications, and China Mobile and Huawei are jointly responsible for the architecture of 5G, making China more powerful in the data world than the U.S.

The cost is of most concern in many cases. Prices for service would most likely start out pretty high compared to where we are now, covering the costs to implement the technology.

In several articles of mine, I’ve called on anticipatory businesses and individuals to pay attention to the Hard Trends shaping the future both inside and outside of their industries, and the digital disruptors that may affect them directly or indirectly. Implementation of 5G would certainly jump-start those disruptions.

The following are perfect examples of technology-driven changes I’ve discussed in previous articles and their correlation to 5G technology:

  • Vehicle-to-Vehicle Communications and Driverless Automobiles. 5G will enable Vehicle-to-Vehicle (V2V) communication, using the low latency of 5G wireless networking, allowing each vehicle to know exactly what all the other vehicles are doing around it.
  • Virtual Reality (VR) and Augmented Reality (AR). Ultra-fast connectivity and synchronicity are important for the user experience, as video communication within corporations will be meshing with VR as remote employees take virtual tours of a manufacturing plant with individuals who are physically there. In the AR world, the very infrastructure of AR glasses and other AR technology is contingent on high-speed connectivity with the amount of data present.
  • Cloud Computing. 5G wireless has the potential for distributed cloud computing services, creating near real-time experiences with edge computing that are much more engaging to users than Amazon, Google, or Microsoft are today.
  • Internet of Things (IoT). Everything from kitchen appliances to parking meters can all be made easier to produce, easier to control, and more connected than ever before. 5G transmitters will become IoT hubs, acting as real-time service hubs for all the households in their specific coverage areas.
  • Healthcare. The availability of low-latency connectivity in extremely remote locations such as Mississippi, where trials of 5G connectivity are implemented, would connect individuals to remote medical professionals for information.

By being anticipatory, many telecommunication providers are pre-solving problems with 5G before they occur by way of moving customers into a 5G business track before most true 5G services exist. It is the perfect time for you and your organization to anticipate what’s to come, and more importantly, what is to be affected by 5G in your industry. By paying attention to the Hard Trends shaping the future, you can stay ahead of the curve to avoid falling behind.

To be certain of the Hard Trends shaping your future, get a copy of my latest book The Anticipatory Organization – I have a special offer for you!

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Economic Storm Coming? What to Do Now.

I get it.  I’ve managed P & Ls through recessions and I understand the options and the challenges.  If you’re not ready for it, sometimes the best you can do during a business downturn is simply play to survive.  This article discusses what you can do before hard times hit in order to expand your choices during.

The Cost of Cost-cutting

Make no mistake:  times sometimes get hard.  For example, if you sold capital equipment into the oil & gas industry during the oil price slide of 2016-2017, you know that there is sometimes no alternative but to “right-size” in response to an uncontrollable market dynamic. Companies need to step up the spending discipline during down cycles.

Cost control is good corporate practice, but it has limits.  Cost control, what one of my first bosses called “frugaling” takes energy and management focus.  Cost-cutting your way to profitability is one of the hardest ways to increase net income. Combining cost-control and growth is even harder:

You can’t shrink your way to growth.

When you start cost-cutting, it’s difficult to maintain customer service and responsiveness levels.  Your people find it harder to be that helpful cheerful voice for your customers.  It’s harder to invest in innovation.  It’s harder to get face-to-face with customers. You are at significant risk of trading customer satisfaction for cost improvement.

As you struggle through needing to “frugal”, don’t mistake right-sizing for a growth plan.

More importantly, don’t mistake a cost-cutting project for a guiding business principle.  It’s a tactical coping mechanism, not a strategy, or a path to long-term success.

Let’s Start With What You Shouldn’t Do

Don’t get taken by surprise.  That company who sells into oil & gas should know that an oil price dip is coming.  One of those is always coming.  Always. Leaders in that industry have absolutely no right to be surprised by the fact that oil prices fluctuate.  It’s just a question of when.  If you aren’t preparing your company for it, you don’t deserve to lead a company.

Don’t start feeling superior to some specific industry, people.  A recession is always coming, too.  Always. Go back and read the paragraph above as if it’s directed at you and your industry, because it is.

You Can Prepare the Hard Way…

Some preparations are really difficult.

  • For instance, you could try to manage your fixed costs down.
  • You could reorganize your financing, trading debt for equity…preferably, patient money. At a minimum, it might be worth it to ask your impatient money to be less impatient.
  • Perhaps you can aggressively build cash during good times. Perhaps you should step up your expense control now so that it doesn’t become need to become dysfunctional later.

These preparations can keep your frugaling from being the kind that damages your company’s long-term health. Keen awareness of customer value (awareness I help clients develop and sharpen) can guide you through prudent cost-cutting.

…Or You Can Prepare a Simpler Way.

Some preparations are more doable (perhaps still challenging, depending on your culture and leadership) but set you up for success – during and after challenging times. I can help with these, by the way.

  • Radically rethink who “sells”. Expand the mission of every customer-facing role in your company. Go beyond current “customer experience” (CX) theory.  Where CX trains your people to “delight”, go further: every person trained in value discovery.  I teach three simple questions and a mindset shift that turn every person into an extension of your sales discovery process.
  • Radically rethink who buys. Typically, one silo at your customer holds budget, but many silos benefit. Get to all of the silos who benefit, and help them realize maximum value from your product or service.
  • Radically re-shape your most important customer relationships. There are specific strategic planning systems that shift key account management from “what all can we sell to this customer”, to “how can we add even more to our customer’s business?”
  • Radically reshape your customer’s perception of the value you deliver. Your customers don’t buy your products or services, they buy business and personal outcomes.  What they are willing to pay for those outcomes can increase if you help them perceive outcomes’ value more clearly.  While you might be able to add new products/services in the medium to long term, your salespeople can add to the value of your existing offerings right now. It just takes the right kind of conversational skills and a little additional business acumen.

Start now.  If the economy tightens, your customers will be distracted, and these will get harder. Also, your competitors will be struggling to take your customers – some will try to buy your customer’s business away from you.

Of Course, You Could Just Not Prepare at All…

You could wing it when the time comes, right? What could go wrong?

Contact me if you would like to discuss what you could do in your business. If you know somebody who might benefit from this article, please share.

To your success!

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Make These Five Preparations Before an Economic Storm

How would you prepare your company if you knew a downturn was coming?  What would you change?  There are a few things you need to think through clearly now; a few preparations you need to make.  You should be doing some of these anyway, regardless of your personal economic forecast, but these “should dos” become “must dos” when the economy slides.

Nobody knows what the future holds, and that includes economists. At some point, though, this historically long economic expansion is going to end. When it does, fortune will favor the prepared.

I don’t blindly follow those who say that a downturn is inevitable simply because the economic expansion has been so long-lasting.  Perhaps I’m still impacted by a company leader saying that in the 1980s, then having that expansion last another two years.  However, there are a few indicators that should give us all pause. One, the shape of the yield curve, has perfect accuracy for the past several recessions.  This may be because this indicator is the aggregated “bet your career and your firm’s money” wager by many of the world’s smartest financial minds, placing much more money than in all of the stock market. Here’s an article that explains it pretty well. I ignored this indicator once and regretted it.

Regardless of your personal forecast, I suggest you go through this pre-storm checklist and give some thought to five issues.

How Will Your People Strategy Change?

Whenever a recession hits, one of the first dilemmas is how/whether to adjust the sales staffing plan. One of the worst burdens of leadership is deciding to downsize. Sadly, your company’s financial condition and financing structure might render this decision easy. Highly leveraged companies and those with short-time-horizon investor populations may not have any option but to lay off and hunker down.

For companies blessed with growth during a downturn — or with patient money backing you — increasing (especially sales) staffing in a downturn takes advantage of competitors’ reduced ability to respond.  While I’ve never been lucky enough to work for a company with the resources to make this happen, the experts tell you to hire…with caution.  There are diamonds in the rough, perhaps stars laid off by financially vulnerable employers, or stars who had better options.  At minimum, I would check the credit ratings of former employers as I prepared to interview a candidate.

Will You Discount? Will it Help?

During a downturn, price pressure will be inevitable. Discounting to win business is a fragile strategy.  Because price declares value, the player who drops price first definitely damages their own reputation (perceived value).  Matching a competitor’s price might bring your value down to their damaged level — unless handled properly.  Maintain a clear view of your value and what it offers to each prospective customer.

Start building value with customers now to minimize how much you’ll need to discount (Helping you do this is what I do).  If you have value, you should be able to maintain some price premium, but as competitors discount, even a solid price premium is applied to a lower base (competitor’s declining price).  By firmly retaining that value premium, you will minimize damage to your offer’s value.

If you can pre-emptively add to your value premium before a competitive price war, you may be able to mitigate some of the damage discounting causes.

Pursuing New Customers

Taking share during a downturn can be challenging.  Most competitors will be fiercely defensive…fighting for survival. How hard do you bang your head against that wall?

Before a downturn, figure out which competitors are already in trouble with their customers.  Your salespeople can sometimes gather this kind of intelligence, but there is an even better source.  Everyone in your company without a sales title who touches customers has a different vantage point based upon trusting relationships – with customer personas who may welcome the chance to resolve a vendor problem.  Train and equip those people to spot competitor vulnerabilities.  While you should always be sharpening this discipline, it becomes much more critical in a down economy.

If your product or service has a potential alternate market, consider exploring one or more of those before a downturn.  Pre-emptively look for opportunities to solve that market’s typical problems in new ways, or to add new value.  A fresh eyes look at your product or service’s possible value propositions and how they could produce novel outcomes for different markets might be in order.

Defending Existing Accounts

As competition escalates, competitors may be coming after your accounts. If you haven’t already, implement an advanced account management program now to pre-empt competitive pressure.  The goal is to make your key accounts more defensible.

The other goal is to grow within your current account base — less challenging than taking share. Account strategy should proactively demonstrate — then grow — your value to customers. Do this, and new opportunities crop up more easily in your existing account base.

The kind of account management program needed is one that focuses on building customer value using a cross-functional team approach.  Once again, your non-sales sellers are key to the success of a cross-functional account management effort. Peer-to-peer executive selling within the value-building charter is another key component.  Contact me if you’d like me to describe such a system in more detail.

Innovation

In a downturn, it’s common to strip R&D to the minimum. With some of the value-focused efforts described above (cross-functional account management and value-focused conversations), you will build a value insights-gathering “engine” enabling you to innovate more inexpensively than you might expect.  I help clients do this all the time, but during a recession, a radical value culture becomes an even bigger competitive advantage.

Another way to achieve some cost-effective innovation is to rethink your capabilities — in terms of what product/service capabilities are used to differentiate you.  These already-developed capabilities are the foundation for new products for existing customers, and are a key element in possible new market expansion efforts; you may see creative new value propositions that your existing technology expertise can capture with relative ease.

Summarizing

If you think a downturn might be coming, get your company’s financial house in order.  The next recession (whenever it does come) doesn’t look like it will be banking-led (the deepest and longest kind of recession), but unconventional economic policies (trade wars, etc.) mean a lot of predictability has been taken out of the economic system.  Agility is always important but will become a watchword during any upcoming cycle.

As you read this article, I hope you see that many of these preparations should be part of your regular management practice.  They become much more critical in a recession, and you’ll be glad you began working on them now.

If I can describe any of these preparations in more detail with you and your team, please reach out.  Otherwise, please like and/or share with your colleagues.

To your success!

 

 

 

 

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Bitcoin’s Highs and Lows: Where to Next?

Since the critical acclaim of Bitcoin and digital currencies in 2017, there has been a lot of talk about its future. Bitcoin was the first digital currency to attract mainstream attention, and after that, 2018 was less than glamorous, with the price plummeting.

Are cryptocurrencies a thing of the past already, or a Hard Trend of the future?

A Bitcoin Overview

Cryptocurrency uses peer-to-peer technology, similar to the file-sharing technology of the early 2000s. Bitcoin was the first cryptocurrency, it being virtual and decentralized. This means no one is in charge of it and it isn’t backed by the government. Bitcoin’s value is protected only by a distributed network that maintains its ledgers and protects its transactions by means of cryptography.

The concept behind Bitcoin first emerged in 2009 by an anonymous programmer (or programmers) using the pseudonym Satoshi Nakamoto. A single Bitcoin is today valued at $8,204, while the market cap is now at $145.66 billion.

Every Bitcoin is connected to an address and every Bitcoin is sent or received by a digital wallet attached to the address. Names aren’t associated with the transactions, creating a system that is wholly transparent while remaining functionally anonymous.

Bitcoin: A Soft Trend?

What exactly can you do with Bitcoins? It’s digital currency, so saving or spending them seems to be the immediate answer. However, in order to spend them, individuals and, more importantly, businesses must accept your Bitcoins. While a growing number of businesses accept Bitcoin, such as Overstock.com, most popular merchants and service providers including Amazon do not.

Let’s first discuss my Hard Trend Methodology and the differences between Hard Trends and Soft Trends to assess Bitcoin’s longevity.

A Hard Trend is a trend that will happen and is based on measurable, tangible, and fully predictable facts, events, or objects. They are future facts that cannot be changed.

A Soft Trend is a trend that might happen and is based on an assumption that looks valid in the present, and it may be likely to happen, but it is not a future fact. Soft Trends can be changed.

While Bitcoin itself grew in popularity, its future success is still a Soft Trend. During 2017, Bitcoin was treated by many as more of an investment than actual currency and likewise faced backlash when it was used for illegal online transactions.

However, the concept of cryptocurrencies is a Hard Trend, and here’s why:

Cryptocurrency: A Hard Trend

Cryptocurrencies are here to stay, including the underlying technology (blockchain) that enables them to function. Cryptocurrency, as well as blockchain, represents a radically new idea in finance: a decentralized system for exchanging value. Due to its open-source nature and its copyright-free core program, there will always be room for improvement. Programmers around the world have already developed military-grade encryptions and new ways to trade, thus stabilizing the prices.

Cryptocurrencies exist as mere entries in a blockchain-enabled accounting system. That system acts as a transparent public ledger that records transactions among “addresses.” Owning cryptocurrency isn’t analogous to having paper money in your pocket. Instead, it means a personal claim to an address, with your own password, and the right to do with it as you see fit. Over time, this will increasingly disrupt traditional models and global currencies, playing a role in a number of future digital transformations.

The Future of Currency: Digital Payments

Imagine you want new shoes, and your favorite shoe store accepts some form of cryptocurrency. If you don’t already possess cryptocurrency, you purchase some from a crypto-currency kiosk or an online exchange and assign it to your online account, known as a “wallet.”

When paying for your new shoes, you open your “digital wallet,” which is unlocked with passwords and/or biometrics, and the currency network is publicly informed that you’ve transferred $100 worth of cryptocurrency to the store. This happens fast, and there are almost no fees and no personal information divulged. Compare this with the slow debit or credit card counterpart, often with a third party involved. The benefits become more clear.

Other Cryptocurrencies

Bitcoin was the first digital currency, but not the last. A large number of cryptocurrencies now exist, and the list is expanding. Litecoin, for example, was launched back in 2011 on the same blockchain as Bitcoin and was meant to improve it. Ethereum was created in 2015 by Vitalik Buterin and is a blockchain-based platform that can be used for developing decentralized apps and smart contracts. The list of cryptocurrencies is actually quite large and, as I said earlier, growing. And the enabling technology, blockchain, is being applied to a rapidly growing number of industries creating both disruption and new opportunities.

In Conclusion

Bitcoin versus the technology category of cryptocurrency gives us a clear example of the difference between Soft Trends and Hard Trends. Cryptocurrencies will continue to evolve and integrate into our economy and everyday life, as will the enabling blockchain technology, making cryptocurrency a Hard Trend, while the future success of individual cryptocurrencies like Bitcoin is a Soft Trend: It may or may not have a bright future. When you’re able to distinguish between the Soft Trends that might happen and the Hard Trends that will happen, you will dramatically improve your ability to understand and manage risk as you become more anticipatory.

Learn how to accurately manage risk with my latest bestselling book The Anticipatory Organization.

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Use Anticipation to Turn Disruption Into Opportunity

For the longest time, cable television was a miraculous technology that not everybody had in their homes, mostly because not everybody could afford it. Now, not everyone has it in their homes because YouTube TV, Sling TV, and other new, emerging technologies have disrupted the broadcast industry. So why didn’t Spectrum think of it first? Why did they become the disrupted and not the disruptor?

At some point, Spectrum and many others established a cash cow — a product or service that generates the majority of your income and profits — and got comfortable building a successful business around it while protecting and defending it. The fact that most of us are all busy, focused, and need to meet or exceed our quarterly numbers keeps us from looking far enough ahead in our industries to see disruption.

In order to thrive in this time of exponential change, it is imperative to actively scan far outside of your industry looking for new ways to disrupt yourself first. When you discover a new technology or disruptive technology-driven trend, it is important to separate what I call the Hard Trends that will happen from the Soft Trends that might happen.

Anticipating disruption before it happens defines whether you’ll be the disrupter or the disrupted, using predictable Hard Trends to create the new cash cows that will disrupt your competitors and grow your future.

Another reason so many companies fail to see disruption is that the strategy most often invoked is to protect and defend the status quo. The amount of time and money organizations spend protecting and defending their current cash cows is astounding, as in the past, this was a valid strategy producing good results. However, digital disruption is different, as it tends to be game-changing with a low cost of entry.

A key to success for an established company that’s facing early-stage disruption is to adopt a strategy of embrace and extend. Spectrum continues to spend millions on bringing in customers for cable, Internet, and phone packages, mostly campaigning on the grounds that you can’t watch sports without cable. Unfortunately, Spectrum and other cable providers saw Internet TV like YouTube or Sling as a Soft Trend, much like Blockbuster viewed Netflix, that could be protected and defended against. It was definitely a Hard Trend. YouTube and Sling have conquered broadcast sports and are quickly leaving Spectrum in the dust.

The assumption that disruption won’t happen to you and your business is dangerous. Today, there are many industries still ripe for disruption. Taking the time to look outside of your industry at the Hard Trends shaping the future will amaze you. Understanding that digital disruption will happen to you if it has not already happened is important.

Ask yourself if you are looking inside and outside of your business. What are your blind spots? What fundamental assumptions about the “way things will always be” do you operate on? And what are you doing to become your own disruptor?

What is a hotel? What is a taxi? What is a bookstore? Companies like Marriott and Barnes & Noble, and even government agencies like New York’s Taxi and Limousine Commission, though they knew the answers to those questions, and Spectrum and other cable providers are currently thinking the same way.

What do you think you know about your industry?

The connectivity of the Internet has changed so many industries. The emergence of Netflix, Hulu, and even Spotify for music has not only revolutionized the entertainment media industry and consumers’ consumption of said media, but it has also closed up some of the loopholes that fostered piracy of content. They are problem solvers, and now they are solving the problem of customers having to pay exorbitant fees to companies like Spectrum and DirecTV to merely cling to one favorite sports channel.

If these cable providers offered a cost-effective alternative with a price and framework similar to YouTube TV’s, they would be using this current disruption to their advantage. But is it too late for them? Are the days of cable as we know it over? Better yet, will Spectrum shrink exponentially until it’s merely an Internet provider? If so, it’d be foolish to ignore the possibility that a more affordable means of accessing the Internet is on the horizon as well.

Letting your ideas about consumers calcify and ceasing adapting or anticipating is when you start inadvertently digging your own grave, no matter how outlandish the disruption may seem. Believing that your business is immune to changing circumstances is the common thread between all disrupted organizations. The fundamental assumptions of so many industries have turned out to be wrong.

You need to become your own disruptor, your own best competition. Don’t get comfortable. Disrupt yourself, or someone else will.

Which technology innovations could be a game-changer for your industry? Learn how to tell with my latest book The Anticipatory Organization.

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Marketers Must Learn to Anticipate Content Trends

Do you remember when MTV was the best way to get in front of the teen and young adult audience? Once mobile technology became popular, it didn’t take long for that age group to be on the move.

In no time, videos were streaming on iTunes. Though teens continued to watch, viewership dropped. Then came instant messaging, followed by social media. For a time, Facebook gave advertisers their niche audience of young consumers congregated in one place.

That is until Snapchat and Instagram came along.

To add to the challenges of the last couple of decades, smart speakers are now in about one-quarter of U.S. homes, and podcasts are gaining popularity. In fact, about 50 percent of households now say they listen to podcasts, with a majority of them joining the trend in just the last three years.

According to whypodcasts.org, 38 percent of listeners are age 18-34, and 64 percent listen on their smartphones.

What’s Next in Target Marketing?

As technology-driven change changes direction, it is easier, and far more profitable, to change direction with it. “It’s easier to ride a horse in the direction it is going.” That’s what my grandfather told me as a little boy working with him on his farm in Texas.

Every company, regardless of size, knows they must advertise if they are to grow. Yet with all the money that is being spent, it is increasingly difficult to get your message to the right audience.

This is where it pays to be anticipatory. Using the systemic method outlined in my Anticipatory Organization Model, you can ready your organization for the disruptive transformations ahead.

Three Hard Trends and Two Tech Trends to Watch

In my work as a technology and business futurist, I have found the most effective way to approach becoming an AO is to focus on demographics, government regulations, and technology. In addition, it is always good to know which consumer technology trends will stick around. I call these Hard Trends (as opposed to Soft Trends, which may come and go).

  • Demographics drive opportunity. There are nearly 80 billion baby boomers in the United States. Not a single one is getting any younger—a definite Hard Trend.
  • Government regulation is a constant. As a general rule, will there be more or less government regulation in the future? Of course, there will be more, and that’s true regardless of the industry or organization. That’s also a Hard Trend.
  • Technology will continue to grow. From the ever-increasing functional capabilities of our smartphones to the growing use of 3D printing, technology is inevitably going to become more functional, more sophisticated, and more widespread. That’s another definite Hard Trend.
  • Multi-layered media is here to stay. According to research, our attention spans are shorter than ever, and consumers demand instant gratification and quick fixes—not a litany of product features and benefits.

Today, content channels such as social media, Apple Watch, and Google Home provide the perfect vehicles for interactivity at any time, in any place, and with any person.

  • Consumer attention is likely to stay at a premium. At least for the foreseeable future, multi-layered media is here to stay. Consumer attention remains at a premium.

Advertisers know the harsh reality: Running an ad on a major television network and supplementing it with web banner ads is no longer a guarantee of reaching the audience.

If you use my Hard Trends Methodology to look ahead to the future of marketing, you’ll be able to anticipate the fast-moving innovations to come. New devices are likely to be developed, and their connectivity doesn’t show signs of slowing any time soon.

Learn to be anticipatory—start with my book, the Anticipatory Organization, available on Amazon.com.

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Beyond Bitcoin: The Future of Blockchain Technology

Bitcoins were introduced in 2009 to great fanfare. Although there had been predecessors, Bitcoins were framed as the first form of cyber currency.

Shortly after Bitcoins were introduced, I labeled them a Soft Trend—one whose future was looking good, but not a future certainty. I also labeled cyber currency a Hard Trend that would continue to grow, predicting that there would be many more cyber currencies.

Since then, I’ve seen no need to change either designation, as there are now more than 100 different cyber currencies. At the same time, as Bitcoins struggled to gain widespread use, blockchain—the technology Bitcoin transactions are handled with—were growing.

Unlike bitcoins, blockchain development has shown no signs of slowing down and represents a Hard Trend that will continue to grow. The rapidly evolving technology of blockchain holds enormous promise for game-changing disruption across any number of industries and fields.

O’Reilly Media presciently noted in early 2015: “The blockchain is the new database—get ready to rewrite everything.”

Blockchain Explained—Security in Numbers

A blockchain is a system of decentralized transaction records. This means a transaction is created without any input from a controlling entity. A blockchain also employs cryptography to keep exchanges secure, incorporating a decentralized database, or “digital ledger,” of transactions that everyone on the network can see. This network is a chain of computers, needing exchange approval before it can be verified and recorded.

The Game-Changing Opportunity in Financial Transactions

Roughly $20 billion in gross domestic product is currently held in blockchain form, according to a study by the World Economic Forum’s Global Agenda Council. However, projections show blockchain use will increase significantly in the next decade as banks, insurers and technology firms embrace the technology to boost transaction speed and security, and trim expenses. This is already taking place, for example, with Swiss banking giant UBS and banks such as HSBC, Santander, and BBVA, which launched corporate venture funds to make equity investments in financial technology companies.

More Than Just Money

The future of blockchain is exciting. Outside of its use solely in financial transaction applications, it can transform several other industries. Other examples include:

  •      Data Storage—Current storage services using cloud technology are centralized around a single provider. A blockchain lets users store data and information via a decentralized platform, improving security and lessening reliance on any one provider.

 

  •      Voting—A blockchain voting network is inherently more reliable than paper or electronic ballots since changing one vote would require changing multiple votes simultaneously. A blockchain voting network has already been used—Denmark’s Liberal Alliance employed a blockchain for internal voting back in 2014.
  •      Military Use—The U.S. Department of Defense and NATO are actively investigating the use of blockchain. Among other applications, they’re interested in messaging platforms capable of transferring information by way of a secure decentralized protocol.
  •      The War on Terrorism—In May 2015, the Isle of Man implemented the first government-run blockchain project, leveraging it to create a registry of digital-currency companies operating on the island. The system also counters money laundering, helping prevent terrorist financing since the flow of money can be traced specifically to the source of the transaction.
  •      “Smart” Contracts—The idea behind a smart contract is that it self-manages the fulfillment of the agreement and is verified programmatically via the blockchain instead of a third party. Two or more parties agree on terms, program those terms into the blockchain, and allow for payments and other transactions once those terms are fulfilled and validated by the blockchain.
  •      Regulation—Because a blockchain cannot be changed without a majority of participants agreeing to do so, the underlying technology might be used in place of a variety of regulations, such as those mandated by Know Your Customer (KYC).
  •      Identity Management—Labeled the first comprehensive blockchain-based identity service, Onename allows users to create tamper-proof digital identities for themselves called Passcards that replace conventional usernames and passwords.
  •      The Music Industry—In October 2015, Ujo Music unveiled a working example of how blockchain-based technology would allow consumers to purchase registered works directly. We can also pre-solve the problem of legalities, where artists publish policies on how their music may be used to avoid legal action against misuse.

More Reasons for Excitement

Blockchain use is largely restricted to private forms of transactions, but when looked at in an anticipatory way of thinking, blockchain could be used for anything that requires proof of identification, the exchange of goods or verification of contract terms.

One executive involved in the development of blockchain summarized its potential in a framework we can all appreciate: “‘Check it on the blockchain’ will be the phrase of the twenty-first century. It will be as commonplace as people saying ‘Google that.’”

When it comes to blockchain, get ready to rewrite everything.

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Don’t Miss AR’s Amazing Opportunities

Augmented reality (AR) is a new industry growing at an exponential rate, loaded with opportunities for job creation. It offers a playground for entrepreneurs who want to use the certainty of Hard Trends to their advantage.

What’s most exciting about AR is that it is much easier to develop than virtual reality (VR), which requires a lot of programming and photo-realistic graphics in order to create a fully immersive virtual world.

AR takes less time and money to develop. Data is overlaid onto a live view of something, and users can multitask, allowing them to work while simultaneously accessing important information.

Both AR and VR have a bright future, but AR represents a much more dynamic world of opportunity. For example, I use an AR app that allows me to hold my smartphone up to any mountain, and the app will tell me the height of the mountain, the length of the trails, and other useful data that can help me determine where I might want to hike, climb or bike on vacation.

AR can also engage tourists who are in a new city for the first time. When you’re on a street in New York, you can tell an app what type of shoes you’re looking for, and all you have to do is hold your smartphone up and pan around to see if any nearby stores have what you want.

Soon we’ll be wearing AR glasses that are connected via Bluetooth to an AR app that will allow keynote speakers like myself to see the people we’re talking to but also see their names, and by moving our fingers along the earpiece of the glasses, we’ll switch from no data to full data.

The Augmented Reality Job Market

We are in the beginning stages of a burgeoning AR market. I would highly recommend entering the world of AR professionally sooner than later. The wide-scale application of AR is only limited by our imaginations, and early developers in the field have barely scratched the surface of what is possible.

Given the wide range of industries that will benefit from AR, I predict that in the next few years we will see a multitude of usages, especially when AR glasses hit the market. Likewise, the glasses themselves will be more aesthetically pleasing thanks to the growth of miniaturization. Prescription AR glasses will be made available for those who need them, changing the usage dynamic from smartphone apps to wearables.

If you are considering a career in AR, it’s important to think about the ideal industry that would benefit from it, such as sales, service, maintenance and repair, factories, retail stores, and real estate offices. There’s a market for it in the trades as well, as AR glasses can be used to help people train quickly to become tradespeople to keep up with growing demand.

Within five years, we will see high-fashion AR glasses worn by many people. Data will be more frequently overlaid on our surrounding environment, and video media will be included. It is already possible to 3-D print a 4K camera that is the size of a fly’s eye, and with advances in solar charging, getting energy from ambient light will help us avoid the concern of charging AR glasses.

The Positives and the Negatives

With every new industry, there are positives and negatives. In augmented reality, the greatest positive is quite clear: increasing humankind’s ability to make better decisions faster.

However, there is always a downside that we must look to solve before it occurs. The most obvious risk is that you might be paying more attention to the data than to visual reality and walk into danger. When it comes to using digital technology, there is always time to unplug. The concept of misinformation also exists, where the data overlaying your environment could be hacked and also put you in danger. Always remember to anticipate risks and think critically.

The future is bright for augmented reality for entrepreneurs and consumers. Ultimately, the industry will develop practical uses much faster than in the world of virtual reality. Virtual reality business applications will find many great niche markets, but augmented reality can be used by anyone anywhere due to the user’s ability to multitask.

The best thing about augmented reality is that you can use it while still interacting with the real world, which is very powerful. It does not encourage us to close ourselves off from our physical existence; it allows us to see insightful information in real time. It will give us a new way to discover the hidden facts that bring the things in our world to life.

We’re only at the base of the mountain of change, and the time to start your climb upward is now!

Technology-driven change is accelerating at an exponential rate, but moving fast in the wrong direction will only get you into trouble faster! Reacting to problems and digital disruptions, no matter how agile you and your organization are, is no longer good enough. If you don’t already have a copy of my latest bestselling book The Anticipatory Organization, click here to get your copy now.

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Five Myths About Price and Discounting

I can’t think of any concepts more misunderstood than price, pricing, and discounting.  An alarming number of businesses price poorly.  We even teach falsehoods about price at the college level.  Let’s discuss five myths about pricing, and its Mr. Hyde alter-ego, discounting.

I usually start breathing fire on this topic, so buckle up.  If this starts feeling a little too close to home, don’t get mad.  Get better.

Myth #1:  Price should be related to your costs.

Price should relate to customer value, period. Cost-plus pricing (your costs, plus some margin should equal price) is only useful to set a minimum, or a walkaway, not your actual price.

Take this one question quiz: Your customer wants a price that is below your costs.  You tell him so.  Question: is the average customer more likely to:

A: Erupt with a sympathetic “Oh, in that case, tell me what you want me to pay!”

B: Let you know, politely or otherwise, that your costs are not his/her problem, and (gently but?) firmly give you some version of “take it or leave it”.

So, if your costs are none of the customer’s business at the low end– and you know it – why should your costs be any of your customer’s business at the high end?

Customers will only pay any price (high or low) voluntarily – at least in the long run.  The reason they pay the price they do is that they find sufficient value in the outcomes your offer delivers.  Figure out your value, quantify it, and then set your price accordingly.

Myth #2:  Dropping your price will increase demand.

This myth is taught in economics classes the world over, up through the college level.  Economists build mathematical models using the law of demand.  Here’s the catch:  The law of demand assumes a few things in order to get the math to work:

  • All consumers and all producers have all information about all alternatives at all times – for free, and without effort.
  • All buying decisions are made without emotion…buyers are all Dr. Spock-like in a world that still uses money.
  • Related to “emotionlessness”, price is merely a number. Offered price does not communicate value to any buyer at any time.
  • All products and services are perfect substitutes for each other. They are absolute commodities, with no differences. There is no such thing as differentiation.
  • It costs nothing to switch vendors. There are no costs to qualify a vendor, and the human bias toward the status quo does not exist.
  • …there are a bunch more, but isn’t any one of these good enough to make my point?

Real life example: If your offer’s ROI is often north of 500% at similar clients, a hesitant customer isn’t going to be motivated by price. Price isn’t the problem with the deal.  Discounting is only going to convince your prospect to doubt the numbers.  Well, OK…not “only”.  There are the financial consequences, too.

Myth #3:  Price is just another feature…no more or less important than any other.

My jaw drops every time (yes it’s happened) a sales “professional” says “It’s the company’s job to make money at the price I sold”.  Then they wonder why nobody in the company invites them to the grownups’ table.

Psychologically, price is the final comparison against value – (value=desirability of your offer’s differentiation). Therefore, it’s the counterbalance against the value of all the differentiated features.  Companies with pricing savvy have proved this for decades, and in many industries – even “commodities” like steel and money.

This is so deeply embedded in the human psyche that price actually communicates value.  Buyers look more favorably at high-priced alternatives – assuming there must be a reason for the price. Dropping price perceptually diminishes every other feature in your offer.  No other feature can do that kind of damage.

If you’re unable to build value in the customer’s mind for the other features, then, sure…go with myth #3.

Myth #4:  You can “make it up on volume”.

The mathematical argument here is that by increasing unit volume at a lower contribution margin, you’ll not only get back to break-even, but get further above it.  (if it isn’t going to end up as more profitable, why work harder for the same – or fewer — profit dollars?).

The mathematical argument assumes your fixed costs won’t rise too.  Let’s think that through.  Say you’re a manufacturing leader and need to double capacity because your company decided  to “make it up on volume”.  The math assumes that you accomplish twice as much using the same plant, equipment, staff, utility bills, G&A, etc.  How many seconds of business school does it take to sniff out the fallacy?  Sure, in an infinite universe with infinite possible realities, it must be possible to “make it up on volume” somewhere, but I haven’t seen it anywhere in this dimension.

Here’s some independent research:

  • McKinsey & Company analyzed the entire Fortune 1000, and on average, a 1% drop in average pricewould cause an 8% drop in profit.
  • Mara and Roriello,in Harvard Business Review, studied an even larger sample, and founda 1% drop in average pricewould cause an 1 % drop in profit.

So…”make it up on volume” disciples:  how much do you discount before down becomes up?

Myth #5:  You can discount for “one time”, or for a “limited time”.

This is the myth of the “limited time offer”.  Your pricing policy is one of the easiest things to train customers on. No reputable company will really give a discount just once, and everyone knows it.  Nowadays, every customer just assumes it .  In fact, it’s actually harder to convince a prospect that an offer really isa one-time thing than it is to simply sell the value in the first place. Plus, the easy option is more profitable.

It gets even worse: customers are very hard to “un-train” on a new pricing policy. Once you go into the discounting tar pit, you might only get out as a fossil.

Worst of all: People change employers.  When one of your customers gets a job elsewhere, they carry knowledge of your discounting behavior with them.  See why it’s a tar pit?

Extra Value Bonus:  

Myth #6: If a customer says “Your price is too high”, it must be true.

Whenever somebody took the time to tell me what they think of my price, they  signaled that talking about my offer and its price was worth their time.  What they are really saying is usually “your value is too low”, or “I don’t understand your value well enough”. The other popular option: “I want your product, but am just checking to make sure I’m not paying any more than I have to.”  This is simply a due diligence step, not an actual price issue.

The customers who really think your price is too high don’t even return your calls.

Bottom Line

As I said, if this article started feeling a little too close to home, don’t get mad.  Get better. If you want to get better, contact me.

To your success!

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