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Design Enlightened by




Alex Zhu
Director of Product Management, 
eBaoTech Corporation
Keepsilence.com@gmail.com 
INFORMATION
FINANCIAL                                                          TECHNOLOGY
 SERVICES




        CONSUMER
          GOODS




  “                                                                    ”
      The future is already here – it's just not evenly distributed.
                          - William Gibson, 2003
10 YEARS



2 YEARS




   “                                                                      ”
          We always overestimate the change that will occur in the next
          two years and underestimate the change that will occur in the
                next ten. Don't let yourself be lulled into inaction.
                                - Bill Gates, 2003
10 YEARS
2 YEARS




     “                                                                           ”
          When we were an agrarian nation, all cars were trucks. But as people
          moved more towards urban centers, people started to get into cars. I
           think PCs are going to be like trucks. Less people will need them.
                            - Steve Jobs, in D8 Conference 2010
chapter I:

The Endless Pulse
of Innovation
Digital structure echoes real-world structure


                                                  ENVIRONMENT




                                  PRODUCTION                        CONSUMPTION
 Economic and Socio-
environmental Structure




                             Enterprise IT                                Consumer IT


                                                   INFORMATION
Technological Structure                          INFRASTRUCTURE


                               Strategy models, process models,
                                                                  Social graph, etc.
                                   organization models, etc.
And therefore IT trends echo real-world trends

                               Structural changes in our society, economy,
                                     technologies, and environment




 Economic and Socio-
 environmental Trends




Technology Megatrends


                              Structural changes in information architecture,
                                           design, and interfaces
IT megatrends create endless waves of hype cycles

                                  Peak of inflated
                                   expectations




Technology Hype Cycles




                         Technology               Trough of         Slope of     Plateau of
                           trigger             disillusionment   enlightenment   productivity




Technology Megatrends


                                 Structural changes in information architecture,
                                              design, and interfaces
Gartner’s hype cycle report 2009 of emerging technologies




                      Source: Gartner Website
Innovative companies take off by riding disruptive trends

                      Industry Trends:
                      • Lean Production (JIT)
                      • Integrated Operation
                      • Globalization


                      IT Trends:
                      • Mainframe -> PC (computer
                        miniaturization )
                      • Real-time Integration
                      • GUI
                      • Buy vs. Built
                                                      SAP launched R/3 in US
                                                      market, as a turning point


   1989   1990        1991       1992       1993        1994       1995       1996   1997


           Example: SAP’s Sales Revenue in United States in the 90’s
                 Source: Book “Inside the Secrete Software Power” by Gerd Meissner
And then focus on optimization to cross their “chasms”

Early Adopters                           Early Majority
• Visionaries                            • Pragmatists
• First to see value                     • Not able to take risk and make own decisions
• Able to take risk and make             • Want to buy from proven market leaders
  own decisions
                                         • Low tolerance of functionality and quality issues
• Tolerate incomplete
                                         • Need “whole product”
  functionalities and quality
  issues                                 • Press and analyst cover important



                       The Chasm

                                                                                    Source: Book “Crossing the
                                                                                   Chasm” by Geoffrey A. Moore




          Innovators   Early Adopters   Early Majority        Late Majority          Laggards
Later they have to repeat this process to avoid being disrupted


                                                       Disruptive
                                                      Technologies

 Sustainable
                             ndin    g u se
 Innovation       M ost dema                                                  High-end market
                                                                                 disrupted
                            lity use
                    High qua


                              ity use
                  Med ium qual

                             lity   us e
                     Low qua




               Source: Book “Innovator’s Dilemma” by Clayton M. Christensen
Why is this relevant to our UX
profession?
By combining strategic thinking, storytelling, effective prototyping,
and UCD methodology, your design can be the trigger of the next
pulse of business innovation…




“Beyond Clicking”
Embrace trendsspotting into your design process

    Understand your business strategy as well
1   as the overall industry landscape




    Include both business trends and
2   technology trends into your research radar


                                                                  Source: SAP Design Guild




                                                     Write a fictitious product marketing brochure, and
                                                 3   think about how you are going to sell your product,
                                                     before you even have the design ready


                                                 4   Storytelling and rapid prototyping
chapter II:
Industry Megatrends
6 interconnected industry trends




                                    2. Take every possible route 
                                           to the market



                                           ENVIRONMENT



6. Economy towards                                                       3. Stand on everybody’s 
     ECO2nomy                                                                    shoulder
                                 PRODUCTION          CONSUMPTION




                                           INFORMATION
                                         INFRASTRUCTURE


                              1. The Intels, Walmarts, and in‐betweens


 5. Towards a cloudy (and                                                  4. Fly above 
weightless) service economy                                              commoditization
Megatrend #1:

The Intels, Walmarts, and in-betweens
Vertical market towards horizontal market

Innovation
 Intensity



                                                        Process Innovation



                                                   Product Innovation



                                                                                  Time

 Pre-mature market               Matured market
 • Products undefined            • Products commoditized
 • Trial-and-error               • Best practices identified            “Dominant Design
 • No standards defined          • Industry standards emerge                Theory”
 • Product innovation pays off   • Process innovation pays off
 • Vertical market               • Horizontal market
This ends up with a highly distributed value chain

                                PRODUCTION                                                 CONSUMPTION




Platform Suppliers           Niche Producers                   Retailers             Consumers & Prosumers
Supply goods, services,     Produce verticalized         Aggregate goods,             Polarized into 2 segments
technologies as shared      value in the area of their   provide choices and          with different expectations
resources, to reduce cost   “centre of gravity”,         convenience, and build       and behaviors. Prosumers
of reproduction, and        levering infrastructure      intimacy with                are actively participating in
therefore lowers barriers   provided by platform         consumers. Reduce the        the value creation process,
to entry                    players, as well as          transaction cost for both    and seek more
                            market lever provided        producers and                individualization and self-
                            by the distributors.         consumers.                   services

    Concentration                Proliferation               Concentration                   Segmentation
Specialization & integration on production side

•   Different participants focus on their respective “centre of gravity”.

•   “Platform suppliers” are based on “economies of scale” whereas retailers thrive on
    “economies of scope”. Both of these 2 sectors stay concentrated.

•   The in-betweens benefit from the levers provided by both the platform suppliers
    and retailers, and the barrier to entry is increasingly lower, and therefore we see a
    proliferation of “virtual businesses” and “mini businesses” (e.g. iPhone gaming
    developers).

•   These niche players can better satisfy all kinds of consumption needs, which
    platform players can’t anticipate or have no bandwidth/motivation to address. (e.g.
    “there is an app for that!”)

•   This virtualized value chain posts great challenges to the current fragmented IT
    infrastructure. Business operations need to be seamlessly integrated on the network
    level, across different entities on the value chain.
Virtual insurer



   Direct model, with strong internet presence
   Large volume of gross premium, but with very few
    employees
   Playing on top of the platform provided by its
    parent company ASR, which is one of the top 3
    insurers in Holland
   Most routine operations outsourced (call center,
    claim handling, etc.)
   Even part of the distribution is outsourced. A lot of
    volume is reached through white-labeling model
    (OEM) partnered with affinity groups
   20+ system-to-system interfaces were built during
    implementation
Polarization on the consumption side

•   The rise of prosumers: more informed and technically empowered customers are
    participating in the value creation process . They need engagement,
    individualization, and personal identity.

•   Some producers are actively extending their value chain downstream, and involve
    off-the-payroll community in their innovation & design process (crowdsourcing)

•   As the barrier of entry has been further lowered by both the platform suppliers
    (platform of production) and retailers (platform of consumption), the boundary is
    blur between prosumers and “virtual businesses” (e.g. smugmug, iStockphoto, etc.)

•   Pure consumers, on the other hand, need easier and intuitive consumption (e.g.
    popularity of iPad in business executive groups)

•   Both prosumers and consumers need choices. Henry Ford’s motto “you can have
    any color you want, as long as it’s black” is no longer valid.
Crowdsourcing for collective intelligence
Made.com: crowdsourcing + individualization + engagement
Local Motors: crowdsourcing + individualization + engagement
Google Earth: upload GPS data
Opportunities for enterprise IT

Business Needs:                                 IT Trends:

   Ability to collaborate with business           eSOA 2.0
    partners with lower cost and in real-          Industry standards (e.g. ACORD for
    time                                            insurance)
   Ability to gain business transparency          Cloud computing and inter-tenant
    (market fluctuations, risks, etc.) across       collaboration
    entire networked value chain
                                                   Supply chain optimization
   Ability to predict and simulate for
    continuous business process                    Distributed risk management
    optimization (e.g. BPO simulation and          RFID
    sourcing)                                      Self-services
   Ability to combine collective                  Convergence of consumer IT and
    intelligence with traditional business          enterprise IT
    intelligence approach
   Ability to open more capabilities to
    prosumers through self-services, and
    connected with the other business
    operations such as order fulfillment
Megatrend #2:

Take every possible route to the market
Upstream players diversify their distribution channels

                             PRODUCTION                                           CONSUMPTION
                                                     Route 1




                                                     Route 2




                                                      Route 3




Platform Suppliers        Niche Producers               Retailers          Consumers & Prosumers

    Upstream players in the value chain continue to explore new distribution channels to reach the
     consumption, to collect more long-tail revenue
    This strategy does not only affect the Go-to-Market model, but also has profound implications on
     product/service design
    They need new scalable approaches to manage this mass distribution, balancing between
     diversification and standardization
Selfish altruists thrive by giving away

•   Platform’s key value proposition is to centralize and share the fixed cost and risks
    (e.g. R&D, mining), and reduce the marginal cost (cost of reproduction).

•   Best example is middleware

•   By making the platform open and sometimes free, platforms suppliers lower the
    barrier to entry for downstream players

•   Successful platforms set up de facto industry standards, and therefore reduces the
    total transaction cost in the value chain (e.g. Blu-ray)

•   Platforms are monetized through royalties, revenue sharing, or “knock-on” effect of
    other products/services (e.g. Android).

•   Rule of thumb: 2~3 dominant platform players competing in the market (e.g. Blu-
    ray vs. HD-DVD, iOS vs. Android, BI platforms, Facebook vs. OpenSocial, etc.)
     – Too many lead to chaos and high cost, and a single platform leads to monopoly concern.
Design Enlightened by Megatrends
Routes to market in consumer goods industry
                                                                           One-tier
                        Indirect                                         Distribution
                                                              Indirect
                       Consumers
                                                             Consumers
                  Indirect                 Outlet/
                 Consumers               Supermarket                                     Multi-tier
                                                                                        Distribution
                                                       Web Aggregator/
                                                         TV Outlet                            Indirect
                   Franchised                                                                Consumers
                     Retailer


                                                                                  Retailer
                    Website
                   /Vending
   Direct        Machine/Mobile         Manufacturer
                                                               Wholesaler
Distribution
                        Factory                                                         White-Label
                        Outlets                                                         Distribution
                                                                                          Indirect
                                                                                         Consumers
       Direct
     Consumers
                                                               OEM Integrator

                             Captive Sales
                              /Telesales
Routes to market in insurance industry
                                                                          One-tier
                        Indirect                                        Distribution
                                                             Indirect
                       Consumers
                                                            Consumers
                  Indirect              Independent
                 Consumers                 Broker                                       Multi-tier
                                                                                       Distribution
                                                      Web Aggregators
                                                                                             Indirect
                     Agency                                                                 Consumers



                                                                                 Retailer
                    Website
                   /Vending
   Direct        Machine/Mobile          Insurance
                                                             Downstream
Distribution                               Carrier             insurer

                     Branches                                                          White-Label
                      /Offices                                                         Distribution
                                                                                         Indirect
                                                                                        Consumers
       Direct
     Consumers
                                                              OEM Integrator

                              Tied Agents/
                                Telesales
Requirements on product design: componentized, adaptable, and embeddable



                                                   Direct                 B2B
                                                Consumption            Interfaces




                                                      Direct
                                                   Consumption



                 BEFORE                                                             AFTER

  Implications to Product/Service Design:
     Componentization of product/service gives more bundling opportunities to reach a larger market
     Expose part of the offering to external partners through friendly B2B interfaces, and allow easy 
      adaptation and integration
     The B2B interfaces needs to follow industry standards, to ideally should be container‐agnostic
     During the product design, both the “direct consumption” scenarios and “long‐tail consumption”
      scenarios should be considered
Translated into our familiar terms



                  Different Contexts


    Direct                               Indirect
 Consumption                           Consumption




                              Application
User                 +        Programming
Interface
                              Interface
Example: Sears API
Repurpose & Mashup
Example: Esurance’s online partner program
Example: AIU’s OEM model with doyouhike.com

                             • AIU China (Chartis) distribute
                               travel and accident products on
                               doyouhike.com which is China’s
                               largest online community for
                               outdoor activities
                             • Products are co-designed with
                               doyouhike.com, and tailored to
                               special needs of this community
                             • White-labeled with doyouhike’s
                               branding
Opportunities for enterprise IT

Business Needs:                               IT Trends:

   Ability to roll out products to new          Product Lifecycle Management
    distribution channels quickly, and have       integrated with business intelligence,
    them tailored to new market segment           and collaboration
   Ability to manage lots of product            Multi-channel distribution
    variances without making compromise           management platform
    in transparency and governance               Business-driving configuration (e.g.
   Ability to support diversified channels       rules, pricing, etc.)
    with standardized and automated              Web-oriented Architecture (WOA)
    operations
                                                 Social CRM
   Ability to streamline B2B
    collaboration to simplify the final
    consumption no matter how
    complicated the route could be
Design Examples
Some Agencies, Brokers, Call                                                 3rd-party Web Sites
Centers                                                                      (Aggregators, White-label Partners)
Some channel partners may prefer to use their own                            SalesPlatform web services can also be
POS systems. In this case, system-to-system                                  provided to 3rd party web aggregators such as
integration will be much simplified by leveraging the                        moneysupermarket for premium computing.
standardized and well-documented web services
provided by the SalesPlatform.
                                                          “eBaoTech
                                                        SalesPlatform”
                     Standardized            2                           3     Standardized
                     Web Services                                              Web Services




                      Direct Portal                                             Embeddable Web
                         Access              1                           4        Components




Agents, Agencies, Brokers, Call                                          Insurer Website & Affiliate
Centers                                                                  Websites
Agents, banks, car dealers, brokers, and call                            Embeddable web applications allow carriers to
centers can easily connect to carrier’s                                  easily inject E-commerce capabilities to their
SalesPlatform directly through secure internet                           existing websites
connection
                                                                         Widgets can also be easily plugged into affiliate
                                                                         websites to generate more “long tail” revenue
Actuary                                                                               “Suite” Model
                              1. Analyze & Design

                                  Market Analyzer                                         Common Sales & Marketing, Common Parties
              Legal /                                                    E.g. quotation
            Compliance          Ideas Management                          calculation
                                                                                            GS              LS                  GL
                                                                                            PA              PA                  PA
                                Structure Designer

                                 Cost & Profit Test                                                        E.g. surrender handling
              Sales &
             Marketing           Compliance Test
                                                                                                 Product Lifecycle Mgt.
                                Documentation Mgt.
                                                                                                           E.g. accumulator in claim

                                                                                                       Common Claim
                     “Closed-loop”
                                                                                                          Platform
                     & Collaborative
                          PLM                                         Actuary
                                                                                                      Data Warehouse
                                                                                                                                       E.g. performance
                                                                                                                                            analysis
      3. Measure & Monitor                  2. Model & Deploy

              Planning                        Structure Designer
                                                                      Product
       Performance Analyzer                   Lifecycle Designer     Marketing

            Loss Analyzer                     Documentation Mgt.

       Portfolio Management                   Lifecycle Simulation
                                                                     Business
                                             Deployment & Rollout    partners
 Product
              Financial       Actuary
Marketing
Design Enlightened by Megatrends
“White-label” model enabled by
web services & re-brandable web
          components
Design Enlightened by Megatrends
“White-label” model enabled by
web services & re-brandable web
   Facebook Plug-in to convert FB
          components
 Fans page into a shopping website,
Megatrend #3:

Stand on everybody’s shoulder
Long live the middleman

                              PRODUCTION                                             CONSUMPTION




Platform Suppliers         Niche Producers                Retailers           Consumers & Prosumers


    The earlier prediction of “disintermediation” turns to be a myth. Due to the always limited
     bandwidth on consumption side (scarcity of attention), retailers will stay critical to most producers.
    Digital super-supermarkets are rising, and traditional players need to react. We will see
     convergence of digital retailing and brick-and-motor retailing.
    IT will drive the industry shake-up, centering around how to create best retail experience
Cross-industry competition by nature

•   Retailer’s value propositions
    – Bridge for information asymmetry

    – Integrated customer experience (discoverability, guidance, payment gateway,
      transparency, etc.)

    – Price advantage with strong negotiation power, as well as supply chain collaboration

    – “Economies of scope” for supermarkets (one-stop service, bundling, comparison)

    – “Relevance” for specialty stores (e.g. IKEA, Best Buy, SAP Portal)

    – Geographic convenience for convenience stores (e.g. 7-11, Widgets)

•   The competition in the retail sector is cross-industry by nature. For example,
    – Media contents (music, books, movies) are increasingly distributed through App stores,
      and more and more physical products are sold through Facebook

    – Tesco is selling standard financial products in their store
Supermarkets
 Cross-industry mega-
          aggregators



                                          “store-in-stores”



                                                                                                Banks

   Specialty Stores
  Vertical aggregators



                         Enterprise IT Industry          Publication Industry   Financial Service Industry



Convenience Stores
       Delivered with                             Widgets
         convenience                              framework
The rise of digital supermarkets

•   For virtual products (e.g. applications, insurance) and commoditized products (e.g.
    cell phones), digital players are showing their competitive advantages over brick-
    and-motor competitors, and will increasingly erode revenue from traditional
    players.
     – Ability to aggregate infinite products (long-tail effect)

     – Discoverability (taxonomy, tags, recommendation engines, search, etc.)

     – Geographic convenience (several-clicks-away)

     – Comparison

     – Social experience (reviews, friend recommendations)

     – Transparency (e.g. easy to search more information online)

     – Individualized experience (e.g. based on behavior)

     – No waiting line

     – Cheap!
P&G in Facebook




P&G have just trialed a Facebook store for their new Pampers Cruisers line of
diapers – selling out of 1000 packs @ $9.99 in under an hour.
Traditional players also become geeky

•   To respond, traditional players need to leverage new technologies and practices in
    their brick-and-motor stores to create unique “real-life” experiences. For example:
     – Build store-in-stores on digital supermarkets to extend the market reach

     – Deliver personal greetings and recommendations to customer’s mobile phone or TVs
       (wireless, RFID, NFC)

     – Leverage QR code reader or barcode reader to aid shopping

     – Support mobile payment for quick check-out

     – Participate in mobile coupon programs (e.g. Foursquare) to reward loyal customers

     – Leverage Augmented Reality technologies and social network to combine the benefits of
       digital and brick-and-motor stores.

     – Etc.
Best Buy’s store in Facebook
IKEA’s Augmented Reality application on iPhone
QR Codes in Japanese retail stores
Store preview on Google Map
Foursquare royalty programs
Social retailing - IconNicholson
Every node wants to be a super node

                              PRODUCTION                                             CONSUMPTION




Platform Suppliers         Niche Producers                Retailers           Consumers & Prosumers


    The earlier prediction of “disintermediation” turns to be a myth. Due to the always limited
     bandwidth on consumption side (scarcity of attention), retailers will stay critical to most producers.
    Digital super-supermarkets are rising, and traditional players need to react. We will see
     convergence of digital retailing and brick-and-motor retailing.
    IT will drive the industry shake-up, centering around how to create best retail experience
Design Enlightened by Megatrends
Megatrend #4:

Fly above commoditization
Experience innovation as a new dimension

Innovation
 Intensity
                                                           Experience Innovation

                                    Process Innovation




                                      Product Innovation
                                                                                          Time

 Pre-mature market               Matured market                    Saturated market
 • Products undefined            • Products commoditized           • Products commoditized
 • Trial-and-error               • Best practices identified       • Industry standards matured
 • No standards defined          • Industry standards emerge       • Diminishing return from process
                                                                     innovation
 • Product innovation pays off   • Process innovation pays off
                                                                   • Experience innovation pays off
 • Vertical market               • Horizontal market
                                                                   • Horizontal market/Vertical market
The “soft” advantage

                            PRODUCTION                                             CONSUMPTION




                  Service & Experience innovation as key differentiator

   In mature industries, “hard” product features are being commoditized fast. Any competitive
    differentiation in this area will be increasingly expensive and temporary, and will be unaffordable
    for most niche producers
   Experience, on the other hand, give space for low-cost differentiation. Technologies become
    critical facilitator of innovative experience
   There are opportunities for providing better experience almost everywhere in the business process
   Customer’s customer experience, will be an important dimension to consider for UX design
    profession, which is an area we can add tremendous business value.
Opportunities for experience innovation in insurance value chain

                                           Sales &                     Order                       Post-Sales                Supply Chain
           Manufacturing
                                         Distribution    Product     Fulfillment
                                                                    Design:                         Service                  Management


       Product
       Product       Product
                      Product                       Deep understanding and analysis of the
       Design
        Design      Deployment
                    Deployment                                       Marketing:
                                                    customer expectation and the market (e.g.
                                                    pay-as-you-go insurance)
                 Marketing
                 Marketing                                                                     Fulfillment:
                                                                     Creative marketing leveraging social
                                                                     media and App store (e.g.
                           Sales Channel Management                  ComparetheMeekart.com, Esurance, billing as a communication
                                                                                               - Leverage
                           Sales Channel Management
                                                                     GEIKO)                    channel
                              Pre-
                               Pre-    Sales
                                       Sales    Submi-
                                                Submi-                                             Partner Management:methods such as
                                                                                                       - Embrace new payment
                                                            UW
                                                            UW
                              sales
                              sales    Talk
                                        Talk     ssion
                                                 ssion                                                 Google Checkout, mobile payment, etc.
                                                                                                   - Customer Reviewing & Complaint
                                                                Billing &    Printing &            Management
                                                                Billing &    Printing &
                                                               Collection
                                                               Collection     Mailing
                                                                               Mailing


                                                                                           Endorse-
                                                                                           Endorse-        Under-
                                                                                                           Under-
Sales:                                                                                      ment
                                                                                             ment          writing
                                                                                                           writing

-Self-service & UsabilityService & Claim:                                                 Claim
                                                                                          Claim      Claim
                                                                                                     Claim        Claim
                                                                                                                   Claim
- Illustration of benefits                                                                Regis.
                                                                                          Regis.    Handling
                                                                                                    Handling    Settlement
                                                                                                                Settlement
- STP and Real-time Issuance
- Channel Education - Customer-centric View
                         - Self-service & Usability                                                                          Risk Ceding (RI)
                                                                                                                             Risk Ceding (RI)
                         - Multi-channel Collaboration
                         - Operational Efficiency                                                                        Partner
                                                                                                                         Partner        Partner
                                                                                                                                         Partner
                         - Differentiated Service (e.g. Esurance’s online                                               Sourcing
                                                                                                                        Sourcing        Payment
                                                                                                                                        Payment
                         repair monitor)

                                                          Business Monitoring & Optimization
                                                          Business Monitoring & Optimization

                                                             Financial Assets Management
                                                             Financial Assets Management
Creative Marketing by comparethemarket.com
Social media presence and referral
Zipcar’s iPhone application for car finding and unlocking
Opportunities for enterprise IT


Business Needs:                                    IT Trends:

   Ability to proactively manage their social        Social Business Applications (e.g. social
    presence (as well as business partners),           CRM)
    analyze consumer sentiments, and make             Mobile computing, Augmented Reality,
    quick reaction                                     etc.
   Providing additional tools for consumers, to      Innovation platform (in opposition to
    gain more touch points                             packaged “best practice” solutions)

   Ability to innovate quickly without having
    to wait for any “best practices”
Case Study: eBaoTech Insurance Showroom
eBaoTech mobile-enabled auto claim

                                                    Phone call
    1                                                                            2

                                               Mobile
                                             submission
    First Notice of Loss by insured
                                                             submission              Claim Registration
    - Mobile-based car accident wizard
    - Or phone call

                                                                     If inspection
                                                                        needed?                           3
                             Submission &
                             receive claim
                               decision             General Claim
                                                      Back-end
                                                                               Assignment by Dispatch Operator
5                                                                              - GIS-enabled task assignment
                                                                               - Or even completely automated

                                                4
    Inspection Report by Inspector
    - Mobile-based entry
    - Portable printer                               Inspector receives task
                                                     - Mobile-enabled task management
Self-service, intelligent dispatch, on-site settlement

     CONFIDENT
                       Consumer Mobile App for
                       Claim, Query, Renewal,
                       and non-insurance service

  Report Accident

 Roadside Services

My CONFIDENT Policy

       Car Tips




                                                   Inspector data entry and print


 A                                  B




  Intelligent assignment enabled by GIS
Megatrend #5:

Towards a cloudy service economy
Services as vehicles for value transferring

                            PRODUCTION                                            CONSUMPTION


                                                      services
          services




                                          services



                          Elastic services as value-adding vehicles

   The service sector is increasing in economy structure
   Product servitization is taking place in many industries, driven by specialization, customer demand,
    and technology maturity
   The service-based business model can be more profitable, if the service can be standardized and
    automated
   Many services can be digitalized and provided “in the cloud”. Cloud computing and BPO are
    converging.
Service sector is driving the world economy




Source: IMF, World Economic Outlook   Source: CLSA, Money Morning Research
Driving forces behind product servitization

•   The concept “Servitization” describes the transformation in which manufacturing
    firms once focus on the production of tangible goods turn to focus on providing
    service in its original business.

•   Driving forces of servitization include:
     – The power shifts towards the consumption side.

     – Vendors want to shift from the one-time relationship to a long-term relationship, and
       therefore creates a “lock-in” effect

     – Specialization creates economic advantage in Business Process Outsourcing

     – Development in technology/information infrastructure

•   Benefits of servitization model:
     – Better match between the production and consumption. From product-centric to value-
       centric

     – Shared resources and less materialized services create both economic advantages as well
       as environmental advantages.
Products vs. Services

                 Products                                                  Services

• Easy to be commoditized                             • Room for differentiation


• Product quality, functional robustness              • SLA, on-demand and elastic


• One-time relationship                               • Long-term partnership


                                                      • Utility-based or even performance-based
• Standard pricing
                                                        pricing


• Big upfront investment and risk                     • Long-term partnership


• CapEx                                               • OpEx


• Easier to standardize and reduce operational cost   • Depends whether it’s high-tough service or low-
  on vendor side                                        touch service
Case study: jet engine manufacturers' “power by hour” model

                          Before:
                              Airlines have to make huge upfront
                               investments
                              Risks in utilization rate, and mechanical fault
                               during the operation
                              Uncertainty in maintenance and support-
                               related cost, and need to have in-house
                               expertise which is expensive


                          After:
                              Low upfront investment, and predictable
                               return on investment
                              Utility-based pricing
                              ROLLS ROYCE participates in the airline
                               daily operation through remote services and
                               embedded inspection systems (Quick) in the
                               jet engines
IBM and GE transformed from hardware to service providers
Zipcar provides shared-ownership model

                  Benefits:
                      Pay for actual usage with “in-car technology”,
                       with hours and mileage information recorded
                       and communicated with a central computer
                       via wireless connection
                      Everything included (car usage, gas, and
                       insurance)
                      Ability to reserve through web or mobile at
                       any time
                      Plug-in hybrid vehicles
Pay-as-you-drive insurance: servitization of financial service

                              Benefits:
                                  Premium based on actual risk exposure
                                   (mileage, speed, location, etc.)
                                  More affordable insurance for drivers
                                   (especially those low-mileage drivers)
                                  Initial research estimates that pricing
                                   insurance by the mile could cut total driving
                                   by 5 to 15 percent, which would make a huge
                                   environment impacts of the automobile, and
                                   also they might see claim savings through
                                   high-end policyholders
                                  Insurers will see an increased market share
                                   and a growing reputation as an innovative,
                                   customer-oriented, and socially responsible
                                   company. They may also have fewer claims.
Servitization in the entire software stack




                                        SaaS

                                        PaaS

                                        IaaS
Opportunities for enterprise IT


Business Needs:                                       IT Trends:

   Ability to digitalize the traditional business       “Internet of Things”
    services and therefore can provide them in a         Industry standards such as Unified Service
    more scalable and resource-efficient way              Description Language (USDL) for
                                                          semantic integration
   A service marketplace where services can be
    explored, traded, repurposed, and                    eSOA 2.0
    composited                                           “Internet of Services” platform
                                                         Convergence of enterprise IT and
   Ability to integrate external services into the
                                                          consumer IT
    internal business processes seamlessly
SAP’s “Internet of Services” vision




           Source: SAP Public Website
SAP’s “Internet of Services” vision




          Source: SAP Public Website
Megatrend #6:

Economy towards ECO 2 nomy
Shift towards a sustainable value chain

                                           ENVIRONMENT
                                           ENVIRONMENT


                             PRODUCTION                                             CONSUMPTION




                                      Sustainable value chain
   “Sustainable development is development that meets the needs of the present without
    compromising the ability of future generations to meet their own needs.” – UN 1987
   The external cost (environment) needs to be internalized into the economic activities
   The shift towards a sustainable value chain relies on actions taken by all roles in the value chain.
   How to build the economic incentives will be the key challenge
Driving forces

•   Regulation & government mandates
     – e.g. European Union Emission Trading Scheme, taxation

     – Obama’s commitment in “an economy-wide cap-and-trade program to reduce
       greenhouse gas emissions 80 percent by 2050”

•   Consumer awareness and media exposure drive sustainable consumption behaviors
    (e.g. eco-labeling)

•   Cost pressures from increasing energy prices, and eco-friendly practices proved to
    bring economic savings as well (e.g. Dupon)

•   Pressures from competitors and business partners in the networked value chain (e.g.
    ethic sourcing from the “retailers”)

•   NGOs

•   Sustainability bring tremendous business opportunities around product design, and
    business model innovation
Dimensions related to sustainability

•   Greenhouse Gas (GHG)

•   Clean energy

•   Energy & Resource management

•   People, health, and safety

•   Product safety and stewardship (e.g. control of toxic materials)

•   Recycling, disposal, and waste management

•   Biographic diversity

•   Intelligent transportation management
Sustainability practices

•   Sustainability reporting

•   Carbon-neutral and carbon-offset (e.g. retailers, DELL)

•   Green supply chain and ethic sourcing (Walmart, HP, etc.)

•   Environmentally preferable product design and packaging (Lenovo’s recycling
    materials, Intel’s power-saving microprocessors, green insurance)

•   Environmentally preferable business models (e.g. DHL’s new document delivery
    service)

•   Green platform (e.g. betterplace, cap-and-trade platforms, sustainability software
    platform)

•   Equal opportunities for poverty in developing countries (e.g. microfinance and
    microinsurance, education program)
Sustainable consumption: Google PowerMeter




              Source: Google Public Website
Sustainable consumption: Google PowerMeter
SAP’s sustainability reporting




        Source: SAP Public Website
Sustainable consumption: green insurance




        Source: http://www.greeninsurancecompany.co.uk/
GE’s ecomagination program




      Source: www.ecomagination.com
Betterplace as new-practice platform
Opportunities for enterprise IT


Business Needs:                                   Business Needs:

   Manage environmental compliance and risks        Sustainability performance management
    in different regions                              (EPIs, benchmarking, compliance, reporting)
   Ability to do environmental metering             Energy management
    through easier data collection and analysis      Emergency Management
   Environmental accounting to include carbon       Environment accounting leveraging the
    footprint across the value chain                  ABC methodology
   Ability to intelligently manage their            Ethic sourcing, with environmental rating of
    production and transportation to reduce the       suppliers as well as green indexing of
    consumption of energy and resources               materials
                                                     “Internet of things” together with business
                                                      intelligence for automatic data collection and
                                                      analysis
                                                     Embedded “carbon and trade” in financial
                                                      controlling
INFORMATION
                              TECHNOLOGY
 FINANCIAL
  SERVICES




         CONSUMER
           GOODS




THANKS!             keepsilence.com@gmail.com
Photo credits




Streat Sign     http://www.flickr.com/photos/mistermoss/3134331944/sizes/o/
Market Streat   http://www.flickr.com/photos/nicholassmale/4291652894/sizes/l/
Platnet         http://www.flickr.com/photos/wwworks/2222523978/sizes/l/
Bird            http://farm4.static.flickr.com/3114/3199289522_36cf93846a_b.jpg
Empty office    http://www.flickr.com/photos/zenobia_joy/3219818612/sizes/l/
Walmart         http://www.flickr.com/photos/markjms/3466232927/sizes/l/
Intel           http://www.flickr.com/photos/85638163@N00/4635052365/sizes/l/
Gloves          http://www.flickr.com/photos/joost-ijmuiden/4191994421/sizes/l/
Chain           http://www.flickr.com/photos/see-through-the-eye-of-g/4278205663/sizes/l/
Size            http://www.flickr.com/photos/eyesplash/4268550236/sizes/l/
jet engine      http://www.flickr.com/photos/stuseeger/774643686/sizes/o/

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Design Enlightened by Megatrends

  • 2. INFORMATION FINANCIAL TECHNOLOGY SERVICES CONSUMER GOODS “ ” The future is already here – it's just not evenly distributed. - William Gibson, 2003
  • 3. 10 YEARS 2 YEARS “ ” We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don't let yourself be lulled into inaction. - Bill Gates, 2003
  • 4. 10 YEARS 2 YEARS “ ” When we were an agrarian nation, all cars were trucks. But as people moved more towards urban centers, people started to get into cars. I think PCs are going to be like trucks. Less people will need them. - Steve Jobs, in D8 Conference 2010
  • 6. Digital structure echoes real-world structure ENVIRONMENT PRODUCTION CONSUMPTION Economic and Socio- environmental Structure Enterprise IT Consumer IT INFORMATION Technological Structure INFRASTRUCTURE Strategy models, process models, Social graph, etc. organization models, etc.
  • 7. And therefore IT trends echo real-world trends Structural changes in our society, economy, technologies, and environment Economic and Socio- environmental Trends Technology Megatrends Structural changes in information architecture, design, and interfaces
  • 8. IT megatrends create endless waves of hype cycles Peak of inflated expectations Technology Hype Cycles Technology Trough of Slope of Plateau of trigger disillusionment enlightenment productivity Technology Megatrends Structural changes in information architecture, design, and interfaces
  • 9. Gartner’s hype cycle report 2009 of emerging technologies Source: Gartner Website
  • 10. Innovative companies take off by riding disruptive trends Industry Trends: • Lean Production (JIT) • Integrated Operation • Globalization IT Trends: • Mainframe -> PC (computer miniaturization ) • Real-time Integration • GUI • Buy vs. Built SAP launched R/3 in US market, as a turning point 1989 1990 1991 1992 1993 1994 1995 1996 1997 Example: SAP’s Sales Revenue in United States in the 90’s Source: Book “Inside the Secrete Software Power” by Gerd Meissner
  • 11. And then focus on optimization to cross their “chasms” Early Adopters Early Majority • Visionaries • Pragmatists • First to see value • Not able to take risk and make own decisions • Able to take risk and make • Want to buy from proven market leaders own decisions • Low tolerance of functionality and quality issues • Tolerate incomplete • Need “whole product” functionalities and quality issues • Press and analyst cover important The Chasm Source: Book “Crossing the Chasm” by Geoffrey A. Moore Innovators Early Adopters Early Majority Late Majority Laggards
  • 12. Later they have to repeat this process to avoid being disrupted Disruptive Technologies Sustainable ndin g u se Innovation M ost dema High-end market disrupted lity use High qua ity use Med ium qual lity us e Low qua Source: Book “Innovator’s Dilemma” by Clayton M. Christensen
  • 13. Why is this relevant to our UX profession?
  • 14. By combining strategic thinking, storytelling, effective prototyping, and UCD methodology, your design can be the trigger of the next pulse of business innovation… “Beyond Clicking”
  • 15. Embrace trendsspotting into your design process Understand your business strategy as well 1 as the overall industry landscape Include both business trends and 2 technology trends into your research radar Source: SAP Design Guild Write a fictitious product marketing brochure, and 3 think about how you are going to sell your product, before you even have the design ready 4 Storytelling and rapid prototyping
  • 17. 6 interconnected industry trends 2. Take every possible route  to the market ENVIRONMENT 6. Economy towards  3. Stand on everybody’s  ECO2nomy shoulder PRODUCTION CONSUMPTION INFORMATION INFRASTRUCTURE 1. The Intels, Walmarts, and in‐betweens 5. Towards a cloudy (and  4. Fly above  weightless) service economy commoditization
  • 18. Megatrend #1: The Intels, Walmarts, and in-betweens
  • 19. Vertical market towards horizontal market Innovation Intensity Process Innovation Product Innovation Time Pre-mature market Matured market • Products undefined • Products commoditized • Trial-and-error • Best practices identified “Dominant Design • No standards defined • Industry standards emerge Theory” • Product innovation pays off • Process innovation pays off • Vertical market • Horizontal market
  • 20. This ends up with a highly distributed value chain PRODUCTION CONSUMPTION Platform Suppliers Niche Producers Retailers Consumers & Prosumers Supply goods, services, Produce verticalized Aggregate goods, Polarized into 2 segments technologies as shared value in the area of their provide choices and with different expectations resources, to reduce cost “centre of gravity”, convenience, and build and behaviors. Prosumers of reproduction, and levering infrastructure intimacy with are actively participating in therefore lowers barriers provided by platform consumers. Reduce the the value creation process, to entry players, as well as transaction cost for both and seek more market lever provided producers and individualization and self- by the distributors. consumers. services Concentration Proliferation Concentration Segmentation
  • 21. Specialization & integration on production side • Different participants focus on their respective “centre of gravity”. • “Platform suppliers” are based on “economies of scale” whereas retailers thrive on “economies of scope”. Both of these 2 sectors stay concentrated. • The in-betweens benefit from the levers provided by both the platform suppliers and retailers, and the barrier to entry is increasingly lower, and therefore we see a proliferation of “virtual businesses” and “mini businesses” (e.g. iPhone gaming developers). • These niche players can better satisfy all kinds of consumption needs, which platform players can’t anticipate or have no bandwidth/motivation to address. (e.g. “there is an app for that!”) • This virtualized value chain posts great challenges to the current fragmented IT infrastructure. Business operations need to be seamlessly integrated on the network level, across different entities on the value chain.
  • 22. Virtual insurer  Direct model, with strong internet presence  Large volume of gross premium, but with very few employees  Playing on top of the platform provided by its parent company ASR, which is one of the top 3 insurers in Holland  Most routine operations outsourced (call center, claim handling, etc.)  Even part of the distribution is outsourced. A lot of volume is reached through white-labeling model (OEM) partnered with affinity groups  20+ system-to-system interfaces were built during implementation
  • 23. Polarization on the consumption side • The rise of prosumers: more informed and technically empowered customers are participating in the value creation process . They need engagement, individualization, and personal identity. • Some producers are actively extending their value chain downstream, and involve off-the-payroll community in their innovation & design process (crowdsourcing) • As the barrier of entry has been further lowered by both the platform suppliers (platform of production) and retailers (platform of consumption), the boundary is blur between prosumers and “virtual businesses” (e.g. smugmug, iStockphoto, etc.) • Pure consumers, on the other hand, need easier and intuitive consumption (e.g. popularity of iPad in business executive groups) • Both prosumers and consumers need choices. Henry Ford’s motto “you can have any color you want, as long as it’s black” is no longer valid.
  • 25. Made.com: crowdsourcing + individualization + engagement
  • 26. Local Motors: crowdsourcing + individualization + engagement
  • 28. Opportunities for enterprise IT Business Needs: IT Trends:  Ability to collaborate with business  eSOA 2.0 partners with lower cost and in real-  Industry standards (e.g. ACORD for time insurance)  Ability to gain business transparency  Cloud computing and inter-tenant (market fluctuations, risks, etc.) across collaboration entire networked value chain  Supply chain optimization  Ability to predict and simulate for continuous business process  Distributed risk management optimization (e.g. BPO simulation and  RFID sourcing)  Self-services  Ability to combine collective  Convergence of consumer IT and intelligence with traditional business enterprise IT intelligence approach  Ability to open more capabilities to prosumers through self-services, and connected with the other business operations such as order fulfillment
  • 29. Megatrend #2: Take every possible route to the market
  • 30. Upstream players diversify their distribution channels PRODUCTION CONSUMPTION Route 1 Route 2 Route 3 Platform Suppliers Niche Producers Retailers Consumers & Prosumers  Upstream players in the value chain continue to explore new distribution channels to reach the consumption, to collect more long-tail revenue  This strategy does not only affect the Go-to-Market model, but also has profound implications on product/service design  They need new scalable approaches to manage this mass distribution, balancing between diversification and standardization
  • 31. Selfish altruists thrive by giving away • Platform’s key value proposition is to centralize and share the fixed cost and risks (e.g. R&D, mining), and reduce the marginal cost (cost of reproduction). • Best example is middleware • By making the platform open and sometimes free, platforms suppliers lower the barrier to entry for downstream players • Successful platforms set up de facto industry standards, and therefore reduces the total transaction cost in the value chain (e.g. Blu-ray) • Platforms are monetized through royalties, revenue sharing, or “knock-on” effect of other products/services (e.g. Android). • Rule of thumb: 2~3 dominant platform players competing in the market (e.g. Blu- ray vs. HD-DVD, iOS vs. Android, BI platforms, Facebook vs. OpenSocial, etc.) – Too many lead to chaos and high cost, and a single platform leads to monopoly concern.
  • 33. Routes to market in consumer goods industry One-tier Indirect Distribution Indirect Consumers Consumers Indirect Outlet/ Consumers Supermarket Multi-tier Distribution Web Aggregator/ TV Outlet Indirect Franchised Consumers Retailer Retailer Website /Vending Direct Machine/Mobile Manufacturer Wholesaler Distribution Factory White-Label Outlets Distribution Indirect Consumers Direct Consumers OEM Integrator Captive Sales /Telesales
  • 34. Routes to market in insurance industry One-tier Indirect Distribution Indirect Consumers Consumers Indirect Independent Consumers Broker Multi-tier Distribution Web Aggregators Indirect Agency Consumers Retailer Website /Vending Direct Machine/Mobile Insurance Downstream Distribution Carrier insurer Branches White-Label /Offices Distribution Indirect Consumers Direct Consumers OEM Integrator Tied Agents/ Telesales
  • 35. Requirements on product design: componentized, adaptable, and embeddable Direct B2B Consumption Interfaces Direct Consumption BEFORE AFTER Implications to Product/Service Design:  Componentization of product/service gives more bundling opportunities to reach a larger market  Expose part of the offering to external partners through friendly B2B interfaces, and allow easy  adaptation and integration  The B2B interfaces needs to follow industry standards, to ideally should be container‐agnostic  During the product design, both the “direct consumption” scenarios and “long‐tail consumption” scenarios should be considered
  • 36. Translated into our familiar terms Different Contexts Direct Indirect Consumption Consumption Application User + Programming Interface Interface
  • 39. Example: Esurance’s online partner program
  • 40. Example: AIU’s OEM model with doyouhike.com • AIU China (Chartis) distribute travel and accident products on doyouhike.com which is China’s largest online community for outdoor activities • Products are co-designed with doyouhike.com, and tailored to special needs of this community • White-labeled with doyouhike’s branding
  • 41. Opportunities for enterprise IT Business Needs: IT Trends:  Ability to roll out products to new  Product Lifecycle Management distribution channels quickly, and have integrated with business intelligence, them tailored to new market segment and collaboration  Ability to manage lots of product  Multi-channel distribution variances without making compromise management platform in transparency and governance  Business-driving configuration (e.g.  Ability to support diversified channels rules, pricing, etc.) with standardized and automated  Web-oriented Architecture (WOA) operations  Social CRM  Ability to streamline B2B collaboration to simplify the final consumption no matter how complicated the route could be
  • 43. Some Agencies, Brokers, Call 3rd-party Web Sites Centers (Aggregators, White-label Partners) Some channel partners may prefer to use their own SalesPlatform web services can also be POS systems. In this case, system-to-system provided to 3rd party web aggregators such as integration will be much simplified by leveraging the moneysupermarket for premium computing. standardized and well-documented web services provided by the SalesPlatform. “eBaoTech SalesPlatform” Standardized 2 3 Standardized Web Services Web Services Direct Portal Embeddable Web Access 1 4 Components Agents, Agencies, Brokers, Call Insurer Website & Affiliate Centers Websites Agents, banks, car dealers, brokers, and call Embeddable web applications allow carriers to centers can easily connect to carrier’s easily inject E-commerce capabilities to their SalesPlatform directly through secure internet existing websites connection Widgets can also be easily plugged into affiliate websites to generate more “long tail” revenue
  • 44. Actuary “Suite” Model 1. Analyze & Design Market Analyzer Common Sales & Marketing, Common Parties Legal / E.g. quotation Compliance Ideas Management calculation GS LS GL PA PA PA Structure Designer Cost & Profit Test E.g. surrender handling Sales & Marketing Compliance Test Product Lifecycle Mgt. Documentation Mgt. E.g. accumulator in claim Common Claim “Closed-loop” Platform & Collaborative PLM Actuary Data Warehouse E.g. performance analysis 3. Measure & Monitor 2. Model & Deploy Planning Structure Designer Product Performance Analyzer Lifecycle Designer Marketing Loss Analyzer Documentation Mgt. Portfolio Management Lifecycle Simulation Business Deployment & Rollout partners Product Financial Actuary Marketing
  • 46. “White-label” model enabled by web services & re-brandable web components
  • 48. “White-label” model enabled by web services & re-brandable web Facebook Plug-in to convert FB components Fans page into a shopping website,
  • 49. Megatrend #3: Stand on everybody’s shoulder
  • 50. Long live the middleman PRODUCTION CONSUMPTION Platform Suppliers Niche Producers Retailers Consumers & Prosumers  The earlier prediction of “disintermediation” turns to be a myth. Due to the always limited bandwidth on consumption side (scarcity of attention), retailers will stay critical to most producers.  Digital super-supermarkets are rising, and traditional players need to react. We will see convergence of digital retailing and brick-and-motor retailing.  IT will drive the industry shake-up, centering around how to create best retail experience
  • 51. Cross-industry competition by nature • Retailer’s value propositions – Bridge for information asymmetry – Integrated customer experience (discoverability, guidance, payment gateway, transparency, etc.) – Price advantage with strong negotiation power, as well as supply chain collaboration – “Economies of scope” for supermarkets (one-stop service, bundling, comparison) – “Relevance” for specialty stores (e.g. IKEA, Best Buy, SAP Portal) – Geographic convenience for convenience stores (e.g. 7-11, Widgets) • The competition in the retail sector is cross-industry by nature. For example, – Media contents (music, books, movies) are increasingly distributed through App stores, and more and more physical products are sold through Facebook – Tesco is selling standard financial products in their store
  • 52. Supermarkets Cross-industry mega- aggregators “store-in-stores” Banks Specialty Stores Vertical aggregators Enterprise IT Industry Publication Industry Financial Service Industry Convenience Stores Delivered with Widgets convenience framework
  • 53. The rise of digital supermarkets • For virtual products (e.g. applications, insurance) and commoditized products (e.g. cell phones), digital players are showing their competitive advantages over brick- and-motor competitors, and will increasingly erode revenue from traditional players. – Ability to aggregate infinite products (long-tail effect) – Discoverability (taxonomy, tags, recommendation engines, search, etc.) – Geographic convenience (several-clicks-away) – Comparison – Social experience (reviews, friend recommendations) – Transparency (e.g. easy to search more information online) – Individualized experience (e.g. based on behavior) – No waiting line – Cheap!
  • 54. P&G in Facebook P&G have just trialed a Facebook store for their new Pampers Cruisers line of diapers – selling out of 1000 packs @ $9.99 in under an hour.
  • 55. Traditional players also become geeky • To respond, traditional players need to leverage new technologies and practices in their brick-and-motor stores to create unique “real-life” experiences. For example: – Build store-in-stores on digital supermarkets to extend the market reach – Deliver personal greetings and recommendations to customer’s mobile phone or TVs (wireless, RFID, NFC) – Leverage QR code reader or barcode reader to aid shopping – Support mobile payment for quick check-out – Participate in mobile coupon programs (e.g. Foursquare) to reward loyal customers – Leverage Augmented Reality technologies and social network to combine the benefits of digital and brick-and-motor stores. – Etc.
  • 56. Best Buy’s store in Facebook
  • 57. IKEA’s Augmented Reality application on iPhone
  • 58. QR Codes in Japanese retail stores
  • 59. Store preview on Google Map
  • 61. Social retailing - IconNicholson
  • 62. Every node wants to be a super node PRODUCTION CONSUMPTION Platform Suppliers Niche Producers Retailers Consumers & Prosumers  The earlier prediction of “disintermediation” turns to be a myth. Due to the always limited bandwidth on consumption side (scarcity of attention), retailers will stay critical to most producers.  Digital super-supermarkets are rising, and traditional players need to react. We will see convergence of digital retailing and brick-and-motor retailing.  IT will drive the industry shake-up, centering around how to create best retail experience
  • 64. Megatrend #4: Fly above commoditization
  • 65. Experience innovation as a new dimension Innovation Intensity Experience Innovation Process Innovation Product Innovation Time Pre-mature market Matured market Saturated market • Products undefined • Products commoditized • Products commoditized • Trial-and-error • Best practices identified • Industry standards matured • No standards defined • Industry standards emerge • Diminishing return from process innovation • Product innovation pays off • Process innovation pays off • Experience innovation pays off • Vertical market • Horizontal market • Horizontal market/Vertical market
  • 66. The “soft” advantage PRODUCTION CONSUMPTION Service & Experience innovation as key differentiator  In mature industries, “hard” product features are being commoditized fast. Any competitive differentiation in this area will be increasingly expensive and temporary, and will be unaffordable for most niche producers  Experience, on the other hand, give space for low-cost differentiation. Technologies become critical facilitator of innovative experience  There are opportunities for providing better experience almost everywhere in the business process  Customer’s customer experience, will be an important dimension to consider for UX design profession, which is an area we can add tremendous business value.
  • 67. Opportunities for experience innovation in insurance value chain Sales & Order Post-Sales Supply Chain Manufacturing Distribution Product Fulfillment Design: Service Management Product Product Product Product Deep understanding and analysis of the Design Design Deployment Deployment Marketing: customer expectation and the market (e.g. pay-as-you-go insurance) Marketing Marketing Fulfillment: Creative marketing leveraging social media and App store (e.g. Sales Channel Management ComparetheMeekart.com, Esurance, billing as a communication - Leverage Sales Channel Management GEIKO) channel Pre- Pre- Sales Sales Submi- Submi- Partner Management:methods such as - Embrace new payment UW UW sales sales Talk Talk ssion ssion Google Checkout, mobile payment, etc. - Customer Reviewing & Complaint Billing & Printing & Management Billing & Printing & Collection Collection Mailing Mailing Endorse- Endorse- Under- Under- Sales: ment ment writing writing -Self-service & UsabilityService & Claim: Claim Claim Claim Claim Claim Claim - Illustration of benefits Regis. Regis. Handling Handling Settlement Settlement - STP and Real-time Issuance - Channel Education - Customer-centric View - Self-service & Usability Risk Ceding (RI) Risk Ceding (RI) - Multi-channel Collaboration - Operational Efficiency Partner Partner Partner Partner - Differentiated Service (e.g. Esurance’s online Sourcing Sourcing Payment Payment repair monitor) Business Monitoring & Optimization Business Monitoring & Optimization Financial Assets Management Financial Assets Management
  • 68. Creative Marketing by comparethemarket.com
  • 69. Social media presence and referral
  • 70. Zipcar’s iPhone application for car finding and unlocking
  • 71. Opportunities for enterprise IT Business Needs: IT Trends:  Ability to proactively manage their social  Social Business Applications (e.g. social presence (as well as business partners), CRM) analyze consumer sentiments, and make  Mobile computing, Augmented Reality, quick reaction etc.  Providing additional tools for consumers, to  Innovation platform (in opposition to gain more touch points packaged “best practice” solutions)  Ability to innovate quickly without having to wait for any “best practices”
  • 72. Case Study: eBaoTech Insurance Showroom
  • 73. eBaoTech mobile-enabled auto claim Phone call 1 2 Mobile submission First Notice of Loss by insured submission Claim Registration - Mobile-based car accident wizard - Or phone call If inspection needed? 3 Submission & receive claim decision General Claim Back-end Assignment by Dispatch Operator 5 - GIS-enabled task assignment - Or even completely automated 4 Inspection Report by Inspector - Mobile-based entry - Portable printer Inspector receives task - Mobile-enabled task management
  • 74. Self-service, intelligent dispatch, on-site settlement CONFIDENT Consumer Mobile App for Claim, Query, Renewal, and non-insurance service Report Accident Roadside Services My CONFIDENT Policy Car Tips Inspector data entry and print A B Intelligent assignment enabled by GIS
  • 75. Megatrend #5: Towards a cloudy service economy
  • 76. Services as vehicles for value transferring PRODUCTION CONSUMPTION services services services Elastic services as value-adding vehicles  The service sector is increasing in economy structure  Product servitization is taking place in many industries, driven by specialization, customer demand, and technology maturity  The service-based business model can be more profitable, if the service can be standardized and automated  Many services can be digitalized and provided “in the cloud”. Cloud computing and BPO are converging.
  • 77. Service sector is driving the world economy Source: IMF, World Economic Outlook Source: CLSA, Money Morning Research
  • 78. Driving forces behind product servitization • The concept “Servitization” describes the transformation in which manufacturing firms once focus on the production of tangible goods turn to focus on providing service in its original business. • Driving forces of servitization include: – The power shifts towards the consumption side. – Vendors want to shift from the one-time relationship to a long-term relationship, and therefore creates a “lock-in” effect – Specialization creates economic advantage in Business Process Outsourcing – Development in technology/information infrastructure • Benefits of servitization model: – Better match between the production and consumption. From product-centric to value- centric – Shared resources and less materialized services create both economic advantages as well as environmental advantages.
  • 79. Products vs. Services Products Services • Easy to be commoditized • Room for differentiation • Product quality, functional robustness • SLA, on-demand and elastic • One-time relationship • Long-term partnership • Utility-based or even performance-based • Standard pricing pricing • Big upfront investment and risk • Long-term partnership • CapEx • OpEx • Easier to standardize and reduce operational cost • Depends whether it’s high-tough service or low- on vendor side touch service
  • 80. Case study: jet engine manufacturers' “power by hour” model Before:  Airlines have to make huge upfront investments  Risks in utilization rate, and mechanical fault during the operation  Uncertainty in maintenance and support- related cost, and need to have in-house expertise which is expensive After:  Low upfront investment, and predictable return on investment  Utility-based pricing  ROLLS ROYCE participates in the airline daily operation through remote services and embedded inspection systems (Quick) in the jet engines
  • 81. IBM and GE transformed from hardware to service providers
  • 82. Zipcar provides shared-ownership model Benefits:  Pay for actual usage with “in-car technology”, with hours and mileage information recorded and communicated with a central computer via wireless connection  Everything included (car usage, gas, and insurance)  Ability to reserve through web or mobile at any time  Plug-in hybrid vehicles
  • 83. Pay-as-you-drive insurance: servitization of financial service Benefits:  Premium based on actual risk exposure (mileage, speed, location, etc.)  More affordable insurance for drivers (especially those low-mileage drivers)  Initial research estimates that pricing insurance by the mile could cut total driving by 5 to 15 percent, which would make a huge environment impacts of the automobile, and also they might see claim savings through high-end policyholders  Insurers will see an increased market share and a growing reputation as an innovative, customer-oriented, and socially responsible company. They may also have fewer claims.
  • 84. Servitization in the entire software stack SaaS PaaS IaaS
  • 85. Opportunities for enterprise IT Business Needs: IT Trends:  Ability to digitalize the traditional business  “Internet of Things” services and therefore can provide them in a  Industry standards such as Unified Service more scalable and resource-efficient way Description Language (USDL) for semantic integration  A service marketplace where services can be explored, traded, repurposed, and  eSOA 2.0 composited  “Internet of Services” platform  Convergence of enterprise IT and  Ability to integrate external services into the consumer IT internal business processes seamlessly
  • 86. SAP’s “Internet of Services” vision Source: SAP Public Website
  • 87. SAP’s “Internet of Services” vision Source: SAP Public Website
  • 89. Shift towards a sustainable value chain ENVIRONMENT ENVIRONMENT PRODUCTION CONSUMPTION Sustainable value chain  “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” – UN 1987  The external cost (environment) needs to be internalized into the economic activities  The shift towards a sustainable value chain relies on actions taken by all roles in the value chain.  How to build the economic incentives will be the key challenge
  • 90. Driving forces • Regulation & government mandates – e.g. European Union Emission Trading Scheme, taxation – Obama’s commitment in “an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050” • Consumer awareness and media exposure drive sustainable consumption behaviors (e.g. eco-labeling) • Cost pressures from increasing energy prices, and eco-friendly practices proved to bring economic savings as well (e.g. Dupon) • Pressures from competitors and business partners in the networked value chain (e.g. ethic sourcing from the “retailers”) • NGOs • Sustainability bring tremendous business opportunities around product design, and business model innovation
  • 91. Dimensions related to sustainability • Greenhouse Gas (GHG) • Clean energy • Energy & Resource management • People, health, and safety • Product safety and stewardship (e.g. control of toxic materials) • Recycling, disposal, and waste management • Biographic diversity • Intelligent transportation management
  • 92. Sustainability practices • Sustainability reporting • Carbon-neutral and carbon-offset (e.g. retailers, DELL) • Green supply chain and ethic sourcing (Walmart, HP, etc.) • Environmentally preferable product design and packaging (Lenovo’s recycling materials, Intel’s power-saving microprocessors, green insurance) • Environmentally preferable business models (e.g. DHL’s new document delivery service) • Green platform (e.g. betterplace, cap-and-trade platforms, sustainability software platform) • Equal opportunities for poverty in developing countries (e.g. microfinance and microinsurance, education program)
  • 93. Sustainable consumption: Google PowerMeter Source: Google Public Website
  • 95. SAP’s sustainability reporting Source: SAP Public Website
  • 96. Sustainable consumption: green insurance Source: http://www.greeninsurancecompany.co.uk/
  • 97. GE’s ecomagination program Source: www.ecomagination.com
  • 99. Opportunities for enterprise IT Business Needs: Business Needs:  Manage environmental compliance and risks  Sustainability performance management in different regions (EPIs, benchmarking, compliance, reporting)  Ability to do environmental metering  Energy management through easier data collection and analysis  Emergency Management  Environmental accounting to include carbon  Environment accounting leveraging the footprint across the value chain ABC methodology  Ability to intelligently manage their  Ethic sourcing, with environmental rating of production and transportation to reduce the suppliers as well as green indexing of consumption of energy and resources materials  “Internet of things” together with business intelligence for automatic data collection and analysis  Embedded “carbon and trade” in financial controlling
  • 100. INFORMATION TECHNOLOGY FINANCIAL SERVICES CONSUMER GOODS THANKS! keepsilence.com@gmail.com
  • 101. Photo credits Streat Sign http://www.flickr.com/photos/mistermoss/3134331944/sizes/o/ Market Streat http://www.flickr.com/photos/nicholassmale/4291652894/sizes/l/ Platnet http://www.flickr.com/photos/wwworks/2222523978/sizes/l/ Bird http://farm4.static.flickr.com/3114/3199289522_36cf93846a_b.jpg Empty office http://www.flickr.com/photos/zenobia_joy/3219818612/sizes/l/ Walmart http://www.flickr.com/photos/markjms/3466232927/sizes/l/ Intel http://www.flickr.com/photos/85638163@N00/4635052365/sizes/l/ Gloves http://www.flickr.com/photos/joost-ijmuiden/4191994421/sizes/l/ Chain http://www.flickr.com/photos/see-through-the-eye-of-g/4278205663/sizes/l/ Size http://www.flickr.com/photos/eyesplash/4268550236/sizes/l/ jet engine http://www.flickr.com/photos/stuseeger/774643686/sizes/o/