Digital transformation has become a dirty word.
They are already out there—walking amongst us. A growing horde of undead SaaS companies that no one wants to acquire or invest in.
These are subscription revenue driven SaaS businesses with low to no-growth and early-stage valuation rounds that contained growth expectations that have failed to materialize. These Zombies lurch forward in niche markets as once novel tools or with weak business models. You can't shoot these Zombies in the head like you would a normal Zombie; SaaS Zombies can survive without a CEO, and I'm seeing a growing number of headless SaaS Zombies.
SaaS Zombies stay alive because their subscription revenues keep the cash and revenue flowing for a period of time, just not at the levels hoped for or invested in. Data from the Kauffman Foundation shows that early stage high-tech companies actually start subtracting from the labor market after 5 years as they move on from the frenzy of their early growth years. High-tech start-ups are great job creators when they are starting-up, not so much when they start to mature.
A SaaS Zombie can't raise capital at ever-increasing valuation levels, but it can survive by doing the same things that no-growth big companies do; focus on productivity and consolidation and pray for innovation. As the data above shows, this is exactly what early stage tech companies do, eliminate jobs. Doing the same with less, that's a productivity boost although it usually doesn't feel like one for the people left doing the boosting, but that's how the math works.
Like any company, SaaS Zombies who cut their workforce can stop burning cash and scale to their level of recurring revenues to stay alive for long periods of time. Working against this however is the ability to innovate, product cannibalization by a competitive market and customer/employee flight. These companies frequently have MRR churn in the 2% range and are struggling to acquire customers and grow existing accounts.
Some Zombies can survive by eating other Zombies, in the hopes that they find some growth synergies as industry rollups or complimentary product combinations. Zombie financing rounds from existing investors, also known as "dead money walking," or down financing rounds are already trending, but these businesses face hard operational decisions that aren't a part of their DNA.
Eventually, some Zombies will be sold, but at much lower valuations than expected—it's a buyer's market and will remain one for these companies. IPO's will be difficult to impossible without a growth story and eventually many Zombies can and will die, but at least they will have kept their chances for some kind of an exit alive—and when the Zombies are running rampant, staying alive is the name of the game.
You may know that Jimmy Durante sings "Frosty the Snowman" in the animated Christmas classic of the same name. Or you may have even heard of his album "Inka Dinka Doo," and if you have, it's within the "Dinka" of "Inka Dinka Doo" where Jimmy meets Big Data.
"D-IN-K-A" is the acronym for what I call the Big Data Lifecycle of Data-Information-Knowledge-Action. This is the process of taking the mountains of digital data appearing everywhere and converting them into something meaningful that can be acted upon.
The secret of Big Data is that it is a process—it lives and it has a lifecycle, including an expiration date. This process is summarized by the 6 Immutable Laws of Big Data:
#6 - Not all Data is relevant
#5 - To be relevant, Data must be accurate
#4 - Data is worth more today, than tomorrow
#3 - Data is only as useful as people's ability to make use of it
#2 - Data not acted upon is worthless
#1 - Data gets more valuable as it moves through it's lifecycle
So whether you are a fan of Big Data, or a Jimmy Durante fan, a little "Inka D-IN-K-A Doo" will help you unleash the power of Big Data.
I pulled together my Top 5 list and then I realized that my predictions all related to the one big trend we'll see in technology throughout the year—
2016 is the year of technology driven business transformation
A lot of technology tools created over the last several years will hit the mainstream. Which means in 2016 we'll see many of these technologies suddenly "appear" as they get rolled out and transform the products, services and how we engage with the organizations that we choose to do business with.
You can also call it the year of the use case, but creativity will abound in how these tools change the day-to-day world of business. Business has also figured out that better technology can drive revenue and productivity which means they know there is money at stake, and nothing motivates business more.
As with many things, it takes the alignment of multiple factors to really see mainstream business disruption. Here's what will drive this:.
Mobile Has Swallowed The Galaxy - Driven by many convergent developments but juiced by a high dose of performance enhancing IoT, mobile first, only and always takes over as spatially and temporally relevant value propositions deliver a lot more value for end-users. Companies, products and services that do not deliver a mobile first proposition will lose, and lose big in 2016. Thanks to smartphones, there's latent demand for better mobile business technology because we're all now more technologically proficient than the companies that serve us—there's a mobile technology vacuum to be filled
Leadership Answers The Cybersecurity Wake Up Call - This medicine is being forced down, but the patient will nonetheless start to feel better. Recent developments on a coordinated public-private effort towards cybersecurity including the recent proposed bill to require US Boards to disclose cybersecurity competence in the Boardroom, will force corporate leadership to finally pay attention to this critical issue. With cybersecurity, we'll start to see fewer top tier brands with headline cybersecurity stories, although attacks will be refocused on the laggards, who will be toast. This will have a transformative derivative effect as it will bring the IT strategy and competitive advantage conversation front and center for many leadership teams.
The Shiny Object - Drones, virtual reality and the driverless car already dominate the headlines. But these aren't ready for prime time—they'll be relegated to niche use cases throughout 2016. Don't get distracted by the shiny object, the focus of 2016 will be sustainable technology driven business transformation. I like anything that changes end-user engagement and drives productivity—so real time communications, IoT and of course mobile are all in my sweet spot for 2016. Demand and tastes are changing because of technology, how companies respond to and fulfill these changes with technology enabled products, services and propositions is now the 2016 ante for business.
We've voted with our technology wallets and we now want business to deliver with theirs. This is where the day-to-day work takes place and real value gets created. Happy 2016!
New technologies present businesses with opportunities to craft new value propositions—to change the game by creating new sources of value for their customers, and along the way capture some of this value for themselves in the form of revenue and profits.
The TCS Global Trend Study 2015 reports a 16% revenue increase by companies in areas where IoT was being deployed with around 9% of firms reporting revenue increases in the 60% range. There's a lot of revenue, and profit at stake with the IoT—here's why.
The Internet of Things (IoT) creates new data collection and distribution points everywhere. These end points are becoming an integral part of our global interconnectedness, building real time engagement not just with each other, but with and throughout our surroundings. And it's not just data, it's real time engagement with video, voice, chat, presence, screen sharing and co-browsing. By meshing real time data, with real time information, knowledge and engagement what can't we reimagine and improve upon?
IoT bridges the last mile of real time connectivity. What can we do better, faster and cheaper with this capability? Can we create products that markets find more attractive, increase supply chain and field service efficiency, improve customer service efficiency and the entire customer experience...the use cases are endless. From healthcare, hospitality, industrial machines to consumer products this technology presents unlimited opportunity to reengineer where value gets created, and how it gets captured.
There are BILLIONS of dollars going towards figuring this out from old school industrial companies like GE to the technology innovators like Salesforce.com who announced their IoT Cloud last week.
This technology excels at eliminating massive inefficiencies that exist all over a value chain to release, create and capture value. Always on real time and location specific connectivity requires value propositions to move from periodic interactions to pervasive engagement. But companies have never had the luxury, or burden, of having to engineer and manage their products, services, organizations or customer relationships in this manner.
The TCS Study cites strategic and cultural barriers as the two biggest hurdles to realizing these gains. This technology is roaring ahead, but business is lagging behind. The floundering that's been on display as companies have dealt with real time customer sentiment and feedback for the first time through social media is testament to how far most businesses need to go to deal with a real time world.
The consumerization of expectations has changed what we define as valuable and what we're willing to spend money on. The companies that get this, will redefine their competitive playing field.
IoT is a game changer—revenue, profit and competitive advantage are at stake. You can't spell opportunity without IoT either.
With an onslaught of bad cyber news this week, is cyber even worth the risk and how should corporate Directors be looking at this issue? This week saw the high profile breach of 4 million employee records at the U.S. Office of Personnel Management by alleged Chinese hackers and the news that even the security experts are getting hacked, with Kaspersky Labs reporting a breach supposedly committed by a nation state.
American President Barack Obama also made cyber security an emphasis of his G7 talks in Germany this week commenting that the US government needs to be more "nimble, aggressive and well-resourced" to combat this ongoing threat. He also urged the U.S. Congress to pass the 2015 Cybersecurity Information Sharing Act, a first step in a coordinated and systemic public/private response to cyber risks.
And the attacks show no signs of slowing down. PwC's 2015 Global State of Information Security Survey indicates a compound annual growth rate of 66% for cyber incidents since 2009. The 10,000 respondents to their survey reported almost 43m detected incidents during 2014 alone—or 117,339 incoming attacks, every day of the year.
Is cyber worth the risk? Yes, but with a caveat. Without a doubt the many innovations currently taking place with today's information technologies open up many new vulnerabilities. Risks are now difficult to isolate, and a protect and defend model is not effective against the systemic risks inherent across any corporate ecosystem.
Attacks can also come from a growing list of sources including hacktivists, foreign and domestic nation states, customers, employees, partners, consultants, competitors, organized crime and the bored neighbors kid living in the basement and surviving on a diet of Cheetos, Red Bull and your weak IT security infrastructure. The direct and indirect costs of mounting an effective cyber security defense are only getting more expensive and the risks are only increasing.
Despite this, these technologies also have an upside—a significant one as they are now competitive table stakes, as new business tools always are. These tools are changing market dynamics and customer preferences and the technologies embody distinct economic advantages such as the lowering of transaction and engagement costs. Business models and competitive advantages are changing as a result of these tools.
These tools are shaping and defining business success, but the risks are holding many companies back. Which takes us to the caveat. The upside of these technologies outweighs the downside.
Cyber is worth the risk, but Boards, Directors and Managers need to be actively looking to exploit the business advantages of these tools, while at the same time mounting a "a nimble, aggressive and well resourced" approach to mitigating these incessant risks.
This is easier said than done; 89% of companies listed on the Fortune 500 in 1955 are no longer on the list. Business cannibalizes the companies that can't capitalize on the opportunities presented by changing market conditions, including new technologies.
Directors need to be diligent in overseeing cyber risk as part of a comprehensive IT governance and enterprise risk management approach. But they also need to be on top of governing cyber opportunity—that's the only way that they can make cyber security risk worth it.