Want to make money with your data?

Please join xLab 
for a free breakfast discussion

Stephan Liozu, agent of disruption and author of the book, Data Monetization,
will share insight on how companies first need to design a value model and then create the technology around it.
~
Friday, February 22, 2019
8:00-9:30 am

Room 02, Peter B. Lewis Building
11119 Bellflower Road,
Cleveland, OH 44106

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If you cannot be there in person, you can also sign up here for a live stream video.

JOIN THIS IMPORTANT CONVERSATION 

Stephan Liozu will discuss how companies scramble to invest in IoT, AI, other digital investments because the digital revolution promises trillions of dollars in created value by 2030. Yet most companies struggle to monetize the data from those investments.

Proving the point, Cisco reported that 60% of IoT Initiatives stall in the Proof of Concept phase and that only 26% of companies have had an IoT initiative that they consider a success. In 2017, Siemens also revealed that less than a fifth (18%) of surveyed companies analyze more than 60% of production data they collect.

Finally, Simon-Kucher & Partners (SKP) reports that 3 out of 4 firms that invested in digitalization in the past 3 years fail in their efforts due to the lack of monetization strategies, a focus on the wrong priorities, lack of customer intimacy, and neglect of digital pricing best practices. In fact, only 18% of these firms are true digital heroes.

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A Network View of the WordPress History

One of the key distinguishing features of digital technology is its generativity. Simply put, it is how the people do things that you as the original creator never thought about doing. Zittrain popularized the concept by analyzing the growth of PC and the Internet. In an ISR article that I wrote with Ola Henfridsson and Kalle Lyytinen, I proposed the notion of layered modular architecture as the technical underpinning of such generativity of digital platform ecosystems.

Despite its importance, there is not enough empirical research looking at the patterns of generative evolution of digital platform ecosystem. One such ecosystem is the platform that I am now using to write my blog. WIth the generous support from the National Science Foundation, my former student, Sungyong Um, and I have been looking at the evolution WordPress since its inception in 2004. Sungyong has collected every plug-in written for WordPress and analyzed their source codes to find out which APIs they use. We found out that plug-in developers mix both APIs developed by WordPress and those by others (such as Google, Twitter, and Facebook). In January 2004, there were 86 plug-ins using 40 APIs by WordPress and 4 by others. A decade later (December 2014), there were 23,218 plug-ins using a pool of 443 APIs, only 99 of which were created by WordPress and the remaining 344 APIs coming from other large and small web service providers.

We characterized each plug-in as a combination of APIs, which allowed us to build a dynamic network of APIs to understand the generative evolution of the entire ecosystem. Below is an animation that shows the dynamic growth of WordPress. In the animation, blue dots are APIs built by WordPress. A line connecting two APIs indicates that those two APIs are being used to build a plug-in. If two APIs are repeatedly used, the lines become thicker. The animation is a bit jittery as the software changes the angle for different years.

The full manuscript is in the final stage (we hope) of the review process. What you will see from the animation is the important role that certain outside APIs play as the network grows over time. We are in the process of analyzing the history of R ecosystem. I will share the results here soon.

What should Apple do?

Over the last three months, Apple lost over $400 billion in market capitalization which is larger than that of Facebook. Together with Tim Cook’s bombshell announcement of cutting its revenue forecast for the quarter that ended in December, this raises a lot of questions about the future of Apple. Of course, for those of us who follow tech companies, this should not come as a big surprise. Apple had a problem of introducing a new premium price hardware product since iPhone. The slow, albeit steady, growth of the revenue from service cannot make up the loss of annual sales of new iPhones. They have already sent a strong signal last year that they were having a problem with iPhone sale when they decided not to disclose the unit sales number. When Apple agreed to sell its products on Amazon, which means Apple has to share its revenue with Jeff Bezos (can you imagine how humiliating it must have been to Apple?), we already know that Apple is no longer the old Apple that defied all the normal rules that applied to other companies.

So, given all the signals, we should have anticipated some kind of bad news from Apple. At the same time, to say that this is the beginning of the end of Apple, and comparing Apple with Nokia (as some in Korea did, somehow suggesting as if Samsung is doing any better) is complete hyperbole in my opinion. Before we think about what Apple should be doing, let’s think about what is happening now.

What is happening now is that a larger percentage of the current iPhone users are not upgrading their iPhones. That does not mean, however, that they are ditching their iPhones. So, what Apple is losing is the incremental sales revenue that used to come from those who upgraded their phone on an annual basis. However, this does not mean that they are losing their user base, which is extremely important in understanding how the platform ecosystem works. I would start worrying about Apple’s future when a larger number of iPhone users are migrating away from Apple’s very sticky ecosystem.

What Apple has been able to do consistently in the past was expanding its user base with new hardware platforms started from iPod to iPhone. Mac, Apple TV, and iPad were important parts of the platform, but in my estimate, they did not significantly add new users to the ecosystem. And, it was primarily through its iOS / iTunes ecosystem that Apple used to keep those users into its premium-priced hardware products. For Apple, until recently, its ecosystem was not the primary source of revenue. Rather, it was to enhance the value of its hardware. Let me say it again. Apple is a hardware company. Software and ecosystem for them are just features!

So, what should Apple do? See, it all has to do with its business model. It is all about creating a steady revenue stream that can replace the loss of the annual iPhone upgrade cycle. Going forward, we can assume that fewer people will upgrade their iPhone each year. I didn’t, for the first time. That does not mean that they will never upgrade their iPhone. Perhaps the majority of iPhone users will upgrade their phones every other year. So, Apple needs to think about making up the loss of revenue stream from the annual iPhone upgrade. Given the way Apple’s business model is set up, there seem to be two things Apple need to do.

First, in the short term, Apple should try to monetize its ecosystem more directly by offering some type of premium membership model. Amazon Prime costs $120 per year. What can Apple do in a similar fashion? Apple has its music, movie, iCloud, Apple Care, and now its own video contents. How about free AirPod and all those annoying dongles? Can Apple come up with a super attractive membership program that includes both hardware, software and service at a premium price point? If Apple can convert a large percentage of its loyal users to sign up for it, it can stop the bleeding. In other words, instead of making people line up outside of the Apple store for a new iPhone, it can make users give up their credit card so that it can automatically renew their premium membership. It is all about creating a recurring revenue stream.

Second, given Apple’s DNA, they should try to find the next blockbuster premium hardware product. Obviously, this is what Apple has been trying to do unsuccessfully over the last few years, which is why many analysts seem to be increasingly pessimistic. Apple tried it with TV and it did not work. It seems like that it is still interested in autonomous vehicles, which is an obvious next premium-priced hardware platform. Of course, people will not upgrade their cars every year, but cars are much more expensive than smart phones. The good news is that with a strong iPhone user base, Apple still has time. If Apple can figure out how to do the membership right, it will have even more time. Will it be successful eventually? Who knows?

Finally, both of these strategies might require acquisitions. Perhaps, Apple can buy Netflix. Perhaps, Apple can finally buy Tesla from Elon Musk.

Launching xLab

The primary reason I returned to Cleveland 2.5 years ago was a simple conviction that one of the biggest crises and opportunities of our time is the digital transformation of the old economy. What we have seen so far is just the end of the beginning. What we will see will likely come from the transformation of the old economy. And, we have plenty of them here in Cleveland! When it comes to digital transformation, it is one target rich area. That’s why I came back to Cleveland and why I remain excited about being here.

This year, I am officially launching xLab@Case. It is a hub of an ecosystem of established firms, entrepreneurs, inventors, students, and scholars to foster digital transformation of the old economy. In the coming weeks and months, I will write more about what we do at xLab. So stay tuned.

xLab logo final

How might we add an audio layer in everyday life?

We are surrounded by all sorts of sounds all the times. Some we choose; some we don’t. We set an alarm clock. We set up music playlist for our exercise. We choose podcasts for our commute. We play music for dinner parties. In between those moments, we have down time. We are surrounded by sound (or noise) that we did not design. Some are oblivious; others are obnoxious. Also in between those moments, we switch devices. From an alarm clock, to smart phone, to our car audio system, and to smart speakers in our dining room. We juggle multiple accounts, multiple playlists, and multiple apps. Can we design and edit the sound around us all the time, across different contexts and different devices? This was one of the ideas that my students today…

new corporate activism

The founder of Twitter posted a blog, “The Tweets Must Flow“. At the same time, working with Twitter, Google introduced voice-enabled Twitting service in order allow Internet-striped Egyptians to tweet through a voice mail. They are heralded as heroic acts by many internet zealots. And it fits nicely into a narrative of technology as a force for positive social change. These two are visible forms of corporate activism by two firms that represent social media. Given how corporations are often associated with the forces of resistance to change, this is a refreshing development.

However, this type of new corporate activism makes me a bit uncomfortable as well. After all, these two companies represent the “face” of social media industry. What is not clear is how much of this new corporative activism by Twitter and Google is indeed motivated by their commercial calculations. Indeed, these were really good PR stunts, if I take a very cynical perspective. After all, they are only accountable to their shareholders. In fact, Twitter is not even a public company yet. These companies are led by executives who are only accountable to their investors.

While I, along with millions of social media users, cheer for the stance that they take on this issue, I wonder will we do the same if they take a similar unilateral corporative activism stance on more controversial issues? In fact, will they take a similar stance even if their commercial interests can be compromised? Not that I am suspicious about their motivations, we need people who remain skeptical and vigilant about these new corporate activisms.

The role of social media in Egypt

I read two articles (this and this) on the role of social media on what is going on Egypt. The first one is written by Malcolm Gladwell. The second one was written by Egyptian author, Haisam Abu-Samra.

Given what he has written few months ago, it is not surprising that Gladwell is very dismissive about the role of Twitter in Egyptian Revolution. He insists that it is the human voice and the contents, not the medium, that ignites a social revolution. He begins his article by arguing that it is what Mao said, not “how” he said that matters. But if President Hu Jintao starts twitting his thoughts and posting his ideas on his Facebook wall, it WILL be a news. Can you imagine millions of Chinese people replying on his wall with what they think about his idea? It will be even more of a news given that China is blocking Facebook.

The article by Haisam Abu-Samra is far more nuanced and interesting. Here’s what he wrote:

The web is in many ways a more modern, much larger version of the kinds of public spaces and forums that have made citizenship possible throughout history. Losing it for a week didn’t stop Egyptians from protesting or airing their frustrations; we still know how to use physical public spaces, after all. But it did remind us that a forum for the open exchange of words and ideas is central to any sustainable democracy; alternatively, we end up in a perilous cycle of control and chaos. Instead of expressing pent-up opinions with fists and bullets, as is happening now in the streets of Cairo, people who can express them freely in conversation, even in a virtual one, have a chance to hear one another and deliberate together about the future. Never mind the vacant symbolism of “Twitter revolutions” and Youtube activism: losing the Internet at the hand of our own government simply offers us a powerful reminder of why we actually want the Internet to begin with, and why we’re doing any of this.

So the question is, can social revolutions happen without Twitter or other social media in today’s world? Of course, the answer is yes. But are they the same old revolutions? The answer is probably no. A question is how are they different? Can someone explore structural and temporal differences between old political revolutions and SNS-enabled ones? That will make an interesting research project.