Realtime feed of skydiver wearing Google Glass prototype in descent to Moscone Center in San Francisco, June 27, 2012. Source: Google

Google had fun at its latest I/O developer conference with a theatrical level performance including skydivers wearing Google’s electronic glasses streaming live realtime video as they descended from high above San Francisco. As they landed on top of Moscone Center they relayed their payload to awaiting mountaineers who repelled down the side of the building. The payload was quickly transferred to bicyclists who road through the auditorium to cheering fans and up onto the stage to an awaiting Sergey Brin (see video).

Latest Details on Project Glass

Nonetheless, the theatrics provided some new information including the announcement that the glasses will become a product next year, and prototypes (i.e. beta version) are now available for $1500 to well-heeled developers flourishing in the Google ecosystem.

The glasses have a touch surface for user controls and a battery mounted behind the ear. Information from the glasses will be transmitted to the cloud and to memory on the device when the user is out of the range of a wireless network.  Other features include multi-sensory input (e.g. voice, sound, visual, touch), a gyroscope, an accelerometer, a compass, and the glasses will take pictures and stream video.

Vertical Integration – A Growing Strategy

As I discussed in a prior post, Google’s Project Glass is a combination of experimentation and product development.  But Project Glass is part of a larger set of trends worth noting. On the competitive front, the Google developers conference clearly indicates that Google is now moving closer to Apple’s philosophy of owning unique hardware designed to intimately operate with its software. Google announced a Tablet (Nexus 7-joint project with Asus) and an entertainment device (Nexus Q) both with custom Google-designed hardware.  Google’s recently approved acquisition of Motorola Mobility further strengthens this strategy.

Note that this new form of vertical integration drives strategies at Apple, Google, Oracle, Samsung, HP and Microsoft.  Experience shows that tight coupling between hardware and software provides efficiency in product development, power management, and miniaturization.  Mated with robust business ecosystem and business platform strategies, we might call this strategy, Vertical Integration 2.0.  By far, Apple is the leader in this regard.

Devices are a Powerful New Entry Point with Customers

The news out of Google also reinforces the growing proliferation of specialized digital consumer devices mated to business platforms – a trend discussed previously in Haydn’s post “The Ecosystem of People and Parts (And APPS!).”  Devices are attractive to consumers, particularly those that provide unique features and services with digital connections.  Such devices can also provide new zest for the customer experience.

Currently the device space is a rich playground for prototypes and learning about consumer attitudes and ergonomics.  With realtime connections these devices also become rich data sources for the company’s R&D organization and marketing department.  Some of those prototypes will become sensations like Google Glasses or the Pebble Watch.  Others will find specialized appeal.  Still others will fail to garner support and will relegated to the recycling bin.   Price points are attractive too — usually in the $40-100 range and early adopters are willing to open their wallets for an early date with the future or simply a new experience.

Eventually some of these independently offered features will be integrated into general purpose mobile devices (i.e. hand-held “phone’) and still others will become part of a personal system of wearable sensors embedded in glasses, belts, and jewelry. Futurists have been predicting this since the 70s. Yet, it will be important to watch developments in this marketplace because the sensors and related service innovations have implications for the financial, healthcare, transportation, and travel industries.  We can also expect that the cost of these devices will have appeal for B2B industries with large deployed service organizations or independent service professionals.

The View Looks Good from Google

So Project Glass is a sensation.  So were the unexpected promotional theatrics at Google’s I/O developer conference.  But such theatrics also highlight the transformative digital device marketplace. Such enthusiasm will not go unnoticed by Google’s competitors. And a new list of companies in other industries will find the Google ecosystem a bit more attractive today and in the future. With the recent price split approved for its stock – some investors may also find it to have more appeal somewhere slightly south or $300.

The company took a big chance a couple of years back by appointing a 40 something CEO, Andrew Witty. Witty has brought a little humility to GSK. Like GE’s leadership, he is now saying, publicly, that some of the problems of medicine are too big for a company to solve.

Witty’s recent activity has been to develop a series of new partnerships, the most intriguing of which is with Formula 1 specialist McLaren. We’ve written here before about McLaren and its attempts to adapt its Formula 1 tracking technology to telemedicine. As yet there are no outputs from the GSK-McLaren partnership but at a recent ISPIM conference, Paul Isherwood, their innovation guru, said that the two companies now have teams active on specific projects.

Witty has also got his people thinking about frugal innovation and what they call “fusion”, combining elements from different business lines, but which we would call radical adjacencies. They have also helped set up the bioscience catalyst project in Stevenage, UK and are participants in the Big Innovation Centre at Lancaster University. And of course McLaren’s entry to telemedicine is a classic radical adjacency.

These are all ways of trying to bring GSK into more partnerships with more companies that might disrupt some part of its business. In an elastic world, however it is important to scale partnerships. A few really don’t give you strategic options and we believe strategic options management is the link concept that will allow senior executives to bring coherence to all this type of activity and to build responsiveness in an on-demand market.

Nonetheless, GSK is a giant and Witty is in some metaphoric sense cutting it down to human size, a first step in making it partner and ecosystem-worthy. It is becoming elastic in a very visible way but it is at the start of the journey. To accelerate, they need to look for ways to scale these partner activities. It is amazing that large companies don’t go for partnerships at scale, largely because they believe they already do scale in a different way. It’s not easy to see a way to scaled partnerships, necessarily, but finding new ways to build wealth is what leadership is all about.

Please comment or query. I’d be delighted to answer. I’ve been struggling to embed the PPT but it hasn’t worked so please follow this link.

FitBit Wireless Activity Tracker

Nick wrote recently about the Pebble Watch, the watch that allows you to connect to your iPhone or Android data streams, and Google Glasses, two instances of the growing number of gateways to virtually constructed experiences. I find this connection between people and objects a fascinating development in ecosystem culture. It means  that ecosytems become more complex (with more devices, developers, producers) and more laden with opportunity. But there is another effect. There is a compression of physical and virtual worlds and, in that process, physical goods no longer need intrinsic value. They are a gateway.

To date an ecosystem has tended to form around a platform and a single device or device family – the iPhone and then Android. Then of course the tablets of Apple and Samsung came along. But the physical world adjunct or gateway to the platform is proliferating quickly. Here is GigaOm on the issue:

With the rise of consumer health-tracking devices and social-media-connected mobile health apps, the quantified-self movement has moved from data-obsessed engineers and hackers into the mainstream, thanks in part to new gadgets (such as the Nike FuelBand and the Fitbit) and apps like Strava and the Eatery.

The quantified-self movement already makes use of the Nike Plus, and in fact seemed stalled there for a while. But FuelBand, Pebble Watch, and Google Glasses are surely just the beginning of humans finding ways to augment their productivity and pleasure through connectivity using a plethora of devices. At this point connectivity becomes a whole lot more purposeful – to date it has seemed like connectivity for its own sake. There are other projects in the works such as Sidecar (due for launch soon).

But what it also raises is a very large question about the future of physical vs digital products. Right now the western system of consumption is configured around physical product design, production and distribution – at least in terms of how we characterize economic growth and business strategy. You either do product or you do servies, or you try to layer services onto product.Going forward product looks to be quite different.

What we are seeing is a sea change. The drift towards virtual production is becoming a strong tide. Products like Fitbit are not only fantastically valuable – they are also both extraordinarily personal and a gateway to the virtual with no intrinsic value of their own.

For those of us interesting in ecosystems it’s time to put in some overtime. What used to be a virtually connected economic group is fast becoming a hybrid of physical goods and virtual value.

Universal connectors needs to be seen as the dominant trend in business, forcing behavior and strategy change onto companies.

One example: one of Asia’s largest power utilities runs an innovation platform at its headquarters and branch offices. Nothing unusual there you might say. The platform allows people to input ideas on how the company can improve its products and services. But there is – or was – a glaring problem and it is summed up in that sentence above. The problem is that its most important activities, the ones that keep supply going in a business where supply interruption is the kiss of death, do not take place in offices. They take place on the road and in the air – on the power lines themselves.

So this particular power utility was running an innovation program that was fine, if you thought the business began and ended with those of its employees who worked indoors, maybe on customer service programs or in accounting. But the critical productivity issues resided up a ladder or in a power plant. When they issued field engineers with robust smartphones to allow field engineers to take and tag photographs of their issues and reconfigured their platform to receive images via mobile, then they had a real innovation platform.

The power of the universal connector concept is that it is both descriptive and prescriptive. On the descriptive side it shows how RSS and APIs have been powerful creators of change, reducing business frictions towards zero where they have been applied; and on the prescriptive side, like all five dynamics, the concept is a to do list. In any activity inside a business right now, you have to orient strategy towards maximum connectivity. The power utility in question assumed that its innovation program had only to include people who participate in the desktop paradigm of business. It was a big mistake.

Similarly Facebook was trapped by the desktop paradigm. Here is a company at the forefront of change. It has driven social networking and made it an everyday activity for 900 million members. Facebook’s impact is incalculable, in terms of how we function and relate to people. But universal connectivity was not in its game plan. It seems inconceivable but it is true. When we talk about universal connectors, it can seem like a negligible component of elasticity. What is it in the end, it’s just being connected. But it is so much more. It is the reduction of business friction towards zero. We need to get friction reduction back into the lexicon of business leaders – in the age of socially connected businesses it is the key to scale at low cost and low complexity.

Photo licensed under creative commons from Freeimageslive.

Developers were more than just another market for Apple, however, because as a population they were disproportionately valuable: alone among customer segments, they had the unique ability to make Apple’s platform more compelling. Developers, after all, build for themselves as much as any external audience, and the result was a rich ecosystem of developer oriented tooling and applications – tooling and applications that were by and large more compelling than Linux and Windows alternatives. For Apple, it was the equivalent of renting out an apartment at a premium and having the occupants leave behind a home theater, new kitchens and bathrooms and a kegorator.

Source: http://www.microsoft.com/en-us/news/

A giant has awakened.  Microsoft’s alliance with Barnes and Noble is a major market signal. It should be a wake up call for everyone.  Yes, it’s a great deal for Barnes and Noble and just what the doctor ordered (see my previous blog on B&N). But, it also builds up Microsoft’s business platforms and adds an established e-commerce engine to Microsoft’s repertoire that could add to the appeal of Windows 8.

Yes there are detractors. On Yahoo Finance’s Daily Ticker, Dan Gross quipped, “The desperate got married to the hopeless,” and Henry Blodget added “My guess is that this is rearranging deck chairs.”  I am a fan of both commentators. But, in this case, there is more to the story. The bigger story is about the overlooked overhaul and transformation of Microsoft, the company.

Over the past 30 months Microsoft has begun to move toward elasticity by building a 21^st Century business ecosystem. Apple’s iPhone and iPad was the first wake-up call and the confirmation of the post-PC era – a potential death knell for the Windows franchise.  The second, I believe came from Microsoft’s experience with the Kinect device that was introduced in November 2010 and won the Guinness World Record for the “fastest selling consumer electronics device in history.” The third came from Amazon’s continuing success with their Elastic Compute Cloud.

Microsoft was the undisputed leader in the formation of 20^th Century ecosystems, along with Cisco and WalMart. Everyone envied Microsoft’s partnership with Intel and the extensive VAR (value-added reseller) system they created.  But the ecosystem was closed.  Anyone who participated in the old Microsoft ecosystem had to be approved and most importantly it did not have a powerful business platform as seen today with Apple, Amazon or Google.  But that is changing.

Since then, Microsoft lost its way and almost crumbled under its own weight. But now we see signs of real change.  Microsoft is building a 21^st Century style business that will breathe new life into Microsoft, create a new renaissance in the company and ensure its future value.

Two key signs paint the picture of renaissance, the emergence of Microsoft business platforms and Microsoft business ecosystems.  As we have discussed at length in The Elastic Enterprise, these two components are the nucleus of a new dynamic for 21^st century business. Microsoft should no longer be viewed as a software company or just a tech company.

Behind the scenes of the mainstream press, Microsoft experimented for several years with 21^st Century business ecosystems.  But the experimentation is over:

• The Xbox technology platform has “gone beyond the box” and turned into a thriving business platform (e.g. Xbox Live, Xbox Game Marketplace, Xbox 360 + Kinect). Microsoft now understands how the business platform enables broad participation, enlists loyalty, and empowers widespread creativity – outside the boundaries of Microsoft.  It creates what we call the elastic dynamic.
• Kinect taught Microsoft something important about devices and modern business ecosystems.  Originally, Microsoft saw Kinect as a game product, period.  But when Kinect was introduced, it was immediately hacked.  But not by just “joy riding” hackers, but also scientists, medical technologists, cartographers, and many others.  For a brief moment, Microsoft protested.  But it learned quickly, what Apple and Google learned earlier.  A dazzling breakthrough product attracts followers and co-creators that vastly expand the original footprint and business intent.  It builds a business ecosystem, enhances the brand and increases strategic options.
• SharePoint has grown into a formidable enterprise collaboration tool with significant global market share. Microsoft built a business ecosystem around SharePoint to enlist interested developers and co-creators that would add to the tool.  SharePoint is now a business platform – not just a tool with a powerful and competitive business ecosystem.
• Microsoft is in the Cloud.  Azure, Microsoft’s cloud product and platform competes with Amazon’s Web Services and Elastic Compute Cloud and position Microsoft for a cloud future.
• Microsoft’s recent acquisition of Skype is also in the cloud and is a business platform in its own right and it expands Microsoft’s service portfolio and provides additional services that can be “plugged-in” to other Microsoft business platforms and business ecosystems.
• Microsoft is also transforming its traditional “shrink-wrap” software products, most notably, Microsoft Office into the Cloud making them business platforms that can support a broader ecosystem of partners. And its recent SkyDrive product illustrates the new approach to software products.
• New style alliances.  Microsoft’s alliance with Nokia, its alliance with Barnes and Noble), and its investment in Facebook, shows how Microsoft is moving to a different business structure and business strategy.  Each of these moves gives Microsoft more strategic options, increases the future value of the firm, more elasticity.

So the B&N alliance is a key signal – a sign of renewed life – not puns for a flawed marriage or a maritime disaster.  Microsoft is a different company today. Sure it still has many of its legacy ways and legacy products.  Transformation is risky.  And there is a risk that all of what I’ve mentioned is not a coherent strategy but a series of uncoordinated “life boats” thrown overboard in a panic of impending doom. Or its execution may wind up flawed.

Perhaps.  But If Microsoft continues on its path to elasticity, everyone should take note. As we have seen with Apple, Amazon and Google, no industry is safe.

The Pebble / Pebble Technology
Source: http://www.getpebble.com

Over the past two months I’ve written twice about wearable computing – coming from mainline firms, Nike (the FuelBand) and Google (Google glasses). Nike and Google are well-established elastic enterprises and benefit from the elasticity that they have built into their companies. Their wearable devices add new levels of engagement and options for  their huge base of customers.

But Pebble Technology, the maker of Pebble, is a startup.  It also has a noteworthy distinction: it raised over $1 Million dollars from supporters on Kickstarter in 28 hours – for a product that is not yet in production.   But a snappy video and a low-key pitch inspired thousands to make an “investment.”  The Pebble folks also smartly provided “investors” with various contribution options, from a minimum of $99 to a high of $10,000, but each level will receive 1 or more Pebble watches when they are produced sometime in the fall of 2012.

But I think some other factors contributed to the overwhelming support – factors that further illustrate the power of elasticity and what a start-up can do with elastic enterprise capabilities in the new marketplace.

First of all, the “Pebble folks” are smart and savvy.  Their wearable device piggybacks, in elastic enterprise style, on two major business ecosystems (Apple and Google) that have huge global installed bases and over-the-top cache and brand recognition.  Pebble’s leaders are using the power of elasticity and the new scale and dynamics we outlined and discussed in The Elastic Enterprise.

Think about it.  A small, underfunded, virtually unknown startup, exploits massive scale simply by linking to the SDKs (System Development Kit) of Apple’s and Google’s existing business ecosystem empires, respectively.  Instantaneously, Pebble Technology has global reach, brand resonance, massive advertising, and a potentially long tail benefiting from further developments at Apple and Google.

But there’s more.  Pebble Technology follows Google and Apple in elastic fashion, by offering its own SDK.  It’s already recruiting, software developers, as one of its Kickstarter contribution levels (already sold out), to build special apps to run natively on the Pebble Watch.  So in effect, Pebble Technology is creating its own long tail by developing its own business platform and business ecosystem.  Smart.

But there’s still more.  All of this elasticity creates momentum.  Pebble Technology, by leveraging existing business platforms and business ecosystems, launching its own business platform and business ecosystem, and doing its promo and funding via Kickstarter builds on the momentum of these respective companies and their products and associated fans.  It builds immediate brand recognition with minimal investment and minimal friction.

Finally, while we don’t have the numbers on potential market size, wearable computing will grow.  It could be the next big thing.  If so, companies in the wearable computing space will need all the elasticity they can get as they build an engaged relationship with consumers.  And don’t think about this as simply a B2C play, wearable computing can offer benefits in the B2B space and in specialized work settings.

Not a bad way to start an elastic enterprise.  So far, so good.  Let’s see how sapient Pebble Technology’s leaders prove to be. There are risks, like competition from Apple, Google, Nike, production glitches, as well as being a one product company in an early stage market. But the initial scene of Pebble Technology’s script is captivating.  So far their moves have been very sapient. And they serve up some lessons for all companies. From what I’ve seen, I expect more.

Google CEO, Larry Page Sports New Google Glasses
(Flickr / Thomas Hawk)

This much we know.  According to many reports, an official demo video, and individuals who recently saw Larry Page wearing the glasses at a party, these high-tech glasses superimpose critical information and alerts as one interacts with the physical world, in realtime.  They are essentially a heads-up display for daily life. And if it catches on and moves beyond geekdom, it could be a winner in the interface wars. And no matter how much you want it, whatever you see is a prototype, not yet a product for sale.

But Google’s Project Glass is about more than a new mobile or wearable device – it’s about what we call the vanishing point.  Smartphones and tablets are only the first step on a journey to operationally merge the digital and physical worlds.

The vanishing point is where the physical and digital worlds merge and are seamlessly and meaningfully available to us anywhere and at anytime. The vanishing point and the intermediate steps along the way can be analyzed and modeled. When Haydn Shaughnessy and I strategize with companies about elasticity we include the vanishing point in our analyses.  We typically model it out about five years.  It often has vast competitive implications across all aspects of the business.  It has particular poignancy for the evolving customer experience.

The vanishing point drives innovation in the mobile space.  It drives Apple and it drives Google.  Google had no choice but to “go Android” several years ago.  Otherwise its search business might have been relegated to a mere icon among the billions of screens proliferating across the world.  Nor could Google risk being left in the digital dust of a rapidly receding PC-era.

The same is true today.  Google has no choice but to pursue Larry Page’s and Sergey Brin’s dream to bring these “glasses” to market.  It needs to innovate, make a mark and stake a new claim on its turf.

Google is not alone.  The vanishing point will eventually drive all companies.  From a competitive standpoint, all companies must re-think about how they live across the digital and physical worlds as digital interfaces become more sophisticated and realtime.

So, how should you merge the physical and digital worlds into your business? You’ve undoubtedly been thinking about smartphones.  But that’s not enough. The journey to the vanishing point will force more sophistication and strategy will go beyond apps.

Here are come starting questions to consider:

Context and Customers: When, where and how and in which context is it best to introduce, continue or resume the experience you offer your customers as they go through daily life?  Have you thought about your customer as part of an instantaneously connected customer ecosystem and how you might help each one?  Have you deeply analyzed the key contexts that shape your customer’s use of your products and services and how that might be augmented going forward? Which contexts should be free of digital infringement? Should there be digital-free zones or times relative to your promotions, alerts, or offers?

Employees and the Business Ecosystem: How should your employees and extended business ecosystem operate amidst the increasingly merged digital and physical worlds as they represent your company?  How would you like them to work?  What will change in work settings and work arrangements?  How can the move to the vanishing point augment specialized work, support collaboration, improve safety, increase productivity, and enhance quality?

Effectiveness and Efficiencies: How can you transform your business processes as you navigate the digital and physical worlds?  What new opportunities for innovation and growth does the vanishing point present?  Are their new value propositions?  Are there new competitive moments or breakthrough points? What new efficiencies await your company as you move to the vanishing point?

Risks and Risk Minimization: Experiment, test and don’t forget the bumps in the road.  Some see further digital intrusions as invasive, creepy, unsafe, or simply a nightmare with too much information and complexity (see Maura Judkis, Washington Post’s piece “Google Project Glass: Cool or creepy?”). No doubt the debate will intensify. Thinking and understanding the role of context is critical for de-risking strategies and tactics as we move to the vanishing point. As we’ve seen with texting and making calls while driving – some contexts don’t make sense.  You don’t want blowback on your brand, adverse commentary or worse, adverse events.

Can Google get it right?  Their video looks promising.  Time will tell.  But if Google gets it right it will also get to write a new chapter, perhaps initiating a post-smartphone movement toward the vanishing point.

Already the competition is intense.  Apple too is working on wearable computing.  What does it mean for your strategy and operations?  How will you compete and thrive on the way to the vanishing point?

In the meantime we will begin to publish background papers here on the site. These will give you more detail on the key concepts in the book and how our thinking around them has evolved.  It’s an exciting few weeks for us. We hope you enjoy the book!