In a rapid succession in the space of two weeks, two major Australian banks raised a red warning flag signalling their deep concern of what could be their biggest existential threat. The threat comes from not from the Bank of America, or Citibank, HSBC or Bank of China, but from unexpected sources, in form of nimble technology companies from Silicon Valley.
Commonwealth Bank CEO Ian Narev expressed this view at the G100 Congress in Sydney in May this year.
The new competitors are “the Apples, the Googles, the Samsungs, the PayPals, the credit card companies, who can pick particular slivers as a result of the application of technology into financial services and compete. We need to be prepared for that.” he said.
Ian Narev alluded that regulations have to be adapted to reign in a new type of competition. The trouble with this competition is that there is no precedent. Disruptive innovators create solutions that address needs outside the boundaries of traditional models before invading the established markets threatening to displace the incumbents. What to do?
Take for instance the case of Dwolla. Founded by a 28yo young entrepreneur from Des Moines, Iowa, USA, Ben Milne, Dwolla is a 12-person startup that invented an online payment system that bypasses credit cards completely. This startup is onto something because large financial institutions are very interested in this idea. Venture capitalists are backing the company with money. Just last month Dwolla received $16.5m in funding, its biggest investment yet. It is hard to predict the impact of Dwolla and other similar innovators on the banking system in the near future if the momentum continues.
A couple of weeks ago, the ANZ chief executive Mike Smith described the technological innovation wave that is about to hit the financial industry as “terrifying”. Smith made this statement to the board based on information received following a study undertaken by the bank during a tour in California. “Much of it is being driven by small companies that are very active in payments but very well-funded, and they are moving very quickly.” It is interesting how quickly ANZ followed Commonwealth to look at what is happening in the Silicon Valley. Something must make them nervous.
Reputable banks have some of the deepest moats protecting their business from new competition, something that Warren Buffet always liked about banks. But rapid changes can ruin that assumption. The transformation will go beyond improvement of operations. It’s about service, it’s about having a different presence in the peoples’ lives, with new perceptions. If a “normal” bank is still something that brings to mind images of prestigious physical old buildings (you-come-to-us), the new banks need to become virtual, quick, creative and very social (we-come-to-you).
Will the disruptive innovation brought by super-smart technology companies become a systemic threat to the traditional banking system? Maybe not, not entirely that is. It is more likely that a wave of restructurings, consolidations, and small bankruptcies will re-shape this business. Banks that “read” the market signals will either buy some of the successful fresh innovators, or innovate themselves, or establish alliances to surf this new wave of opportunities and reap the benefits. Others that refuse to see the threat may well as disappear.
It’s not just a smart move, it is a brilliant move. Facebook brings back the glory of making software. While many large IT companies rushes to control both the software and the hardware as a way to dominate the market, Facebook is attempting to succeed by just being best at designing great software. In a way this is similar to what Microsoft has done through their partnership with Nokia, only at a grander scale. Google must be secretly brooding now. For a moment Google seemed to have it all, software and hardware together set in motion in a big wave overwhelming their long time foe, Apple. But here it is, the nightmare called Facebook is back on the front page. All that money poured into Android and Motorola hasn’t yet given any assurance that it will lead to world domination as planned.
The beauty of Facebook Home, as a concept as we don’t know how successful this is going to be, is its simplicity. Facebook created a social software layer on top of an entire ecosystem: Android operating system, hardware manufacturers, telecommunication networks and application developers. They have a phone, without having a phone. If there is someone else affected almost as much as Google is that must be Samsung. They have tried hard to build a services shop on their phone for some time, but with not much success. The media still calls the Samsung branded software applications ‘bloat ware’. And here it is, Facebook just comes along and in one swoop they capture the attention of all those eyeballs. At least what they hope they will do.
The move is brilliant, but it doesn’t guarantee success. Facebook desktop attraction started to lose some of its lustre and consumers have cooled off a bit. It will be interesting to see how the consumer will feel when Facebook is in their face all the time. Mark Zuckerberg describe Facebook Home as “highest quality experience you can have on Android“. If this is true, then the chances of broad adoption are greatly enhanced, but if not, the brand might suffer. The highest risk for Facebook is that although this move is brilliant, it may be too brilliant for their own good. Users may feel Facebook is too much into their lives. Success could irritate because by occupying the space in a dominant way it causes resentment. We have to wait and see.
It Facebook is successful, this may lead to the demise of good old phone number system. Instead of calling your friends using the telephone system, you just talk to your friends using the Facebook voice or video chat. Your Facebook ID could well be your next phone number.
How splendid is Larnaca in September! The weather has an almost equatorial feel with perfect conditions day and night. It is pleasantly warm from sunset until late morning and bearably hot during the day; the sea has a calming presence with its magic blue and the colourful umbrellas peppered along the beach, and palm trees happily giving the final stamp of approval for everyone to stay worry free, relax and have a good time with friends.
Meanwhile at the Sun Beach hotel, a team made of colleagues from UK, Australia, Greece and Cyprus met in a big and bright conference room to discuss Learning Design. The group that gathered in Larnaca representing many years of experience in this field planned to establish a broad conceptual framework as a springboard for the further development of the Learning Design as a methodology.
This has been a perfectly timed workshop. The idea came up last year in December during the LAMS Conference in Sydney, to develop something that would bring all the research related to Learning Design into one contiguous body of work that captures the essence of Learning Design for the benefit of those who are interested in this methodology. The ICEM Conference 2012 (starting in the second half of the week) in Nicosia and Professor James Dalziel’s work on the ALTC National Teaching Fellowship proved to be a great catalyst for excellent collaboration.
Two important things came out of this work: (1) a comprehensive timeline of major events, formation of communities, publications and initiatives that occurred in the field of Learning Design over the past ten years or so, and (2) a high level map of the field of Learning Design (see below).
This is a great beginning for the consolidation of the knowledge generated through research, publications, conferences and many projects implemented in the past decade. The shared view signals an opportunity not only for a more productive academic research in this field, but also for helping teachers around the world, software developers, educational consultants and institutions to adopt Learning Design methodology for a more effective way of teaching students acquire knowledge and learn new skills.
The workshop and its outcomes felt like a strong direction setter and the team agreed unanimously that this event will be referred to in the history of this field as Larnaca Declaration on Learning Design.
An eerie silence is present just before Windows 8 launch. The big stories of the day are the battle between Apple and Samsung, iPhone versus Android, and Google versus Apple. The trending topics on Mashable are in order: Twitter, Google, Apple, iPhone, Social Networking, Google+, Social Media, YouTube, Business, Android, iPad, Google Chrome, and… down the ladder somewhere is lurching Microsoft. No trace of Windows 8.
GigaOm, proudly promoting its own brand of research has almost no trace of Microsoft or Windows 8. Today on its navigation bar there is a prominent Apple menu item and a long list of articles on the home page, only one of which mentions Microsoft related story, although even that is about Xbox music service to launch on Android and iOS. Top articles menu bar has iPhone 5 on a prominent position.
Others are more preoccupied with the imminent invasion. ZDnet and C/Net have tons of articles on Windows 8, but they also have articles criticising the new operating system and predict failure (see below prediction for Win 8 RT certain failure). However, if you browse these two sites, it strikes you how many announcements of new Win 8 products are rushed by a large number of vendors even before the official launch of the platform software. The latest one is from Samsung, the Korean electronics powerhouse who unveils an ultrabook and tablets.
None of the media outlets dares to look into the significance of the new operating system. Sure, it’s risky and judging by the success of Windows Phone 7.5, Microsoft has had an aura of outdated technology. I may be wrong, but I don’t understand why they fail to see the magnitude of Microsoft’s transformation. I can see how they would want to avoid publishing risky prediction, but at least they should take a look at what is going on deep under the surface and forget for a moment the buzzwords of the day. The online journals have columnist who cultivate a loyal relationship with its biased readers. This is always a gold mine for ratings. Whenever and article is published about Apple or Google, an army of loyal fans work hard to make their presence felt. The ratings go up and everyone is happy. Postings about Windows phone 7 have a far smaller ‘stir’ factor.
I don’t have that kind of problem, so I am at an advantage. I can write what I want. To me, Microsoft has achieved an incredible turn around and it has become the innovator, while the others have acquired the status of the conservative incumbents. The tiles introduce a very novel and powerful concept. Because they are designed to be dynamic displaying real-time information pushed by various digital services, the combinations across the massive array of technical services starting from cloud computing platforms, to music, emails, weather, and anything in between, Microsoft is building a super-ecosystem using a quasi-seamless operating system . An example of what kind of services is possible in this super-ecosystem is Xbox Music. This is very difficult to replicate. Google has an excellent search and social network platform, but its operating system is fragmented to say the least. Apple is mono-cultural and built around one service: the AppStore/iTunes.
The signs of adoption of innovation are there: first, all vendors have announced a myriad of products, many of them quite innovative. Secondly, the new products are creating new categories which promise to fill the gap between tablets and laptops. Microsoft Surface is leading this trend. For Microsoft the innovation cycle starts anew.
Thirdly, the IT managers show a great deal of interest in Windows 8. It is interesting that in a survey published on InfoWorld Google Android is loosing share, while iOS is gaining. This is pointing to a problem that Android has in the enterprise space: fragmentation. This makes it difficult to support. Windows 8 will not have that problem and because of its strong compatibility with the legacy Windows platform it will have a faster adoption than the other two. And finally, Windows Phone 8 and Windows 8 RT have a strong support from all vendors. This is where Apples win against Samsung might prove to be a very costly mistake, a Pyrrhic victory. I should also mention Nokia, which released Nokia Lumia 920. For the first time, Nokia looks better on paper than its main competitors, Samsung and Apple.
Windows 8 may have an impact on the education market. iPads are great looking devices, but they are difficult to integrate and use as effective learning tools. The new detachable and convertible ultrabooks may prove to be more practical and for the same reasons IT managers are ready to adopt Windows 8, education systems may have a strong interest in the new devices.
Successful innovation is difficult because it is not enough to have a bright idea. Everybody has one, including me. What separates the boys from men is the implementation. The road to heaven is paved with hard work from the initial blueprint until the finalised product, and its successful adoption which requires team work, focus sustained over a long period and ability to execute and deliver.
The core team that innovates successfully is the equivalent of a queen bee starting a new colony: it produces ideas continuously while surrounding itself with a growing team that takes on tasks derived from those ideas, all of them orchestrated into a collective effort to build a long-lasting product enterprise.
At the beginning, there is no light around innovation, but just a faint white star shining in the distance. There is little information, no training classes and no user manuals. Could your normal team or business units do it? Not likely. They are not suitable for this kind of undertaking because there is no documented process or job description. You need a special team: a small community of practice whose members are innovators.
A community of practice is made of people who have frequent face-to-face meetings; they meet around the water cooler and talk and pick-up clues from little things to spark a creative chain of thoughts. The members of such community are highly skilled, they have knowledge far beyond what is required by the standard job description and they thrive on uncertainty.
Creative enterprises know this very well. Valve’s HR (blasphemy!) induction manual is an interesting case of encouraging teams to work as small communities of practice. It is all about having strong relationships that work, are creative, productive and fun.
Adoption however, although it still depends on communities of practice to figure out how to use the innovation, relies on large social networks to fire-up the spread of the idea.
In fact, the adoption works best if the network is a huge collection of groups linked through weak connections. This is because the networks of strong ties are usually small due to impossibility of individuals to maintain strong relationships beyond say 20 people. Great networkers may go up to 150, but for the average person, even maintaining 10 strong relationships is a struggle. This means that if a community of practice adopts your innovation, you shouldn’t rush to pop that bottle of Don Perignon yet. Settle for a Stella Artois and a barbecued shrimp for the time being.
Mark Granovetter coined the term ‘weak ties’ to describe lose connections in a social group. His research led him to the conclusion that these types of connections are actually the ones that make a personal network very effective. Christakis and Fowler demonstrate in Connected that weak-ties are great for finding fresh information, aka code for new habits.
So, if your Facebook is limited to close friends that think like you, you are missing on a great opportunity to learn something new and useful you and your close friends never thought of before. Better ‘like’ someone different soon!
Globalisation is the other side of localisation. They are like yin and yang, embracing each other.
Two consequences derive out of this:
- The local innovators need to have access to great networks to spread their ideas. If the innovators are not great communicators and if they don’t have network bridges, their innovation will be lost in anonymity and dry
- Innovators and adopters need to think alike as they need each other, but both need to influence a lot more people to get the network going. If the growth in adoption doesn’t keep growing to reach about 16%, they are doomed. They fall into the chasm, Moore’s chasm.
In a recently published book, The New Geography of Jobs, Enrico Moretti says that despite the popularity of the global social networks, the vast majority of the phone calls and web traffic is local. The most innovative cities and regions are based on small, tightly knight, and local communities. With other words, the secret of global success of Silicon Valley is local, very local.
This is also why the local economies’ prosperity depends so much on innovation and free trade.