The 2012 State of the New Digital Economy Brought to you by What you need to know to surviveas a corporate leader in the digital world.
Aericon Insights ResearchFor Chief Executives and Marketing ProfessionalsAugust 2012Aericon is a full service digital marketing agency headquartered in Boston, MA. Our focus is on results oriented agile digitalmarketing programs. We provide strategy, creative and technology services.www.aericon.com
Contents 14–15 PART 4 Social Media Takeover 4–5 PREFACE The New Digital Economy 8–11 PART 2 Mobile Mania 16–17 PART 5 The Facts That are Driving Change6–7 PART 1 Decision Makers Can No Longer Ignore Digital 12–13 PART 3 The Cloud Rush 18–19 PART 6 One Area CEOs Should Focus On in the 3 Current Economy
Based on both quantitative and qualitative global research conducted by Oxford Economics and sponsored by PwC, AT&T, Cisco, Citi, and SAP, this white paper presents key topics that are transforming the global marketplace. Preface The New Digital Economy 364 corporate decision makers and other c-level executives predict the future O xford Economics released a detailed white paper, in mid 2011, entitled “The New Digital Economy,” based on a series of questions they asked 364 corporate decision http://www.pwc.com/gx/en/technology/ publications/assets/the-new-digital- makers and other c-level executives and thought leaders. The research paper was produced economy.pdf in collaboration with AT&T, Cisco, Citi, PwC & SAP. We have reviewed the report, updated it The New Digital Economy with research from McKinsey, KPMG & the International Telecommunications Union, and How it will transform business4 combined it with an insights from our very own Digital Expert and CEO Dean Whitney.
One year later the relevancy of the reportremains sound with many of the fearsand hopes of last years leaders comingto fruition in 2012. This report gives usa current view on a changing economy,touching on the effects of Cloud basedTechnology, Mobile Commerce, BusinessIntelligence and Social Media. We will re-view this report again in 12 months time.We also look forward to your feedbackand comments.Survey profileThis global survey of 364 business execu-tives was conducted in December 2010.Of the respondents, 19% hailed from theUS, 20% from the UK, 15% from India, 14%from Japan, and 8% each from China,Brazil, Mexico and Australia. The surveyrepresented a broad range of industries,including financial services (26%); manu-facturing (19%); technology, information,communication and entertainment (18%);retailing and consumer products (15%);and life sciences and healthcare (11%).More than half (52%) of respondentsworked at firms with revenues of morethan $1billion; 25% had revenues of $500million to $1billion; and 23% had revenuesunder $500 million. Approximately 46%held c-level titles; 27% were senior vicepresidents, vice presidents or directors;and 27% were heads of their businessunit or department.
PART 1 Decision Makers Can No Longer Ignore Digital Nor do they intend to What should CEOs be doing to ensure their firms remain competitive in this disruptive environment? T he new digital economy is here to represent vast opportunities for estab- stay. The barriers to entry are being lished brands and a melting pot of con- lowered and there is a constant threat to sumption for new ones. More and more established business models that don’t executives are realizing that its time to get keep up with societies growing digital af- serious about the new digital economy and6 finities. The race is on. Emerging markets initiate change; before they are forced to.
The three vital areas executives intend to focus on over the next five years are: 1 Mobile Technology: From mobile payments to mobile gaming and web surfing, smartphones and tablets usage is skyrocketing. 2 Cloud Computing: The days of building expensive and time consuming local hosting networks is over. The cloud is faster, cheaper and less averse to technical difficulties. 3 Social Media: Corporations are fighting for your attention against everybody from teenag- ers with an iPhone to blogging moms. Our world has gone social. “We” the people have the power, “You” the corporation need to operate with that mindset.The new era of connectedness enables any individualor organization in the global network to sense, analyze, FIGURE 1: Digital Megatrendsand respond to create value, and exploit untappedopportunities. Which do you believe will have the greatest positive impact on your business over the next five years? Mobile technology Business intelligence Cloud computing Social Media 0% 10% 20% 30% 40% 50% 60% 7
PART 2 Mobile Mania How to make business sense of mobile I s it even a question anymore that the mobile Internet will play a large role in any businesses development? It’s predicted that by 2014, mobile Internet searches will overtake desktop Internet usage. Your business needs to have a budget for marketing and technology. The question is, what percentage of that budget should you invest in mobile. Can you engage customers or solve problems with the native features of their8 smartphones and tablets?
FIGURE 2: Mobility Supports Business Growth The facts According to Nielsen’s report on the US How strongly do you agree with the following statements for your business over the next five years? (% stating agree or agree strongly) mobile market in February 2012, smart- phone usage is growing and 49.7% of mo- bile subscribers now own a smartphone. Our investment in mobile-enabled technologies will focus on supporting business growth comScore reports that more than 100 million U.S. mobile subscribers now use smartphones. We will have to mobile-enable our workforce to stay competetive ❖ f the worlds 4 billion mobile phones in O use, 1.08 billion are smartphones and Our business models will be changed by mobile technologies supporting employee productivity 2.05 are SMS enabled. ❖ 6% of mobile Internet users are using 8 their devices while watching TV. Mobile consumers will transform our business models ❖ 9% of mobile users are open to scan- 2 ning a mobile tag to get coupons. ❖ average Americans spend 2.7 hours On We will apply location-based technologies to enhance our mobile propositions and services per day socializing on their mobile device. ❖ 91% of mobile Internet access is to socialize. 0% 20% 40% 60% 80% 100% ❖ One half of all local searches are per- formed on mobile services. Your business needs to have a budget forYou don’t have to be a c-level executive to optimization (SEO). And SEO ties directly marketing and technology. The questionunderstand that the way we communicate back to the importance of content. It’s not is, what percentage of that budget shouldwith people is becoming more mobile than just keywords that matter, but the need you invest in mobile. Can you engageever. However most people don’t have the to produce high-quality content to impact customers or solve problems with thecheckbooks or the vision to know what your credibility in the eyes of Google. native features of their smartphones?and where to invest. Can you better enable employees with The majority of c-level executives said data or business automation? And doThe content and user-experience online mobile devices are game changers and these benefits outweigh the benefitsneeds to be optimized for mobile. This rein- they will be investing heavily in mobile of all the other stuff you need to spendforces the critical nature of search engine technologies. money on? 9
There are 3 ways your business can “do” mobile 1 You can build a website that is responsive design 2 You can build a mobile version of the website 3 You can build a mobile native application When a website is built with responsive If you do have the cashflow a mobile ver- You might think that it would be more ef- design capabilities, the information dis- sion will lead to a better user experience. ficient to build either a responsive design played on that website suddenly inherits Although building a separate mobile site website or a mobile site. Seemingly that the abilities to morph in size. Layout, text, isn’t as cost effective as building a respon- would cover all bases. You’re content pictures, and action buttons are all scaled sive design site. would be sized appropriately whether to fit whatever size screen you’re using. you’re using mobile, tablet or a computer. However, one problem with a responsive But, you still should consider building a If you’re having trouble picturing what design site is that its mobile version will native mobile application, because of how responsive design looks and acts like, try it have all the same copy as your regu- powerful and influential the Apple and out right now. lar website. A mobile website should Android marketplace is. have content that is much shorter and Jeffrey Zeldman, founder of Happy Cog, a simpler for the smaller screen because App stores are huge channels that can reputable web design and user experience “the lack of context reduces text com- reach wide audiences. consultancy agency, named responsive prehension”  design as number 2 on his list of “Top Web Different audiences like looking at dif- Design and Development Trends for 2012″. At the end of the day, your decision should ferent content through different portals. Having your messaging displayed seam- be driven by return on investment. Some of the most profitable and popular lessly across all platforms is essential for mobile applications fall within the gaming marketers and responsive design makes and social networking categories. that integration possible. That means for the everyday on-the-go web user, your life just got a whole lot more zen-like. No little buttons, no awkward formatting, and no tiny text sizes coupled with bad zoom capabilities. Responsive design is typically cheaper than building a mobile app or mobile ver- sion of a website.10
The Bottom LineAt the end of the day, you need to spendtime understanding who your mobileu sers are and what they want. Dependingupon your cash flow you need to deter-mine the ROI of a mobile application vs. anative application vs. a responsive designmobile presence. That said, there’s anaffordable mobile solution, for your com-pany, available right now; and you shouldstart investigating which option makesmost sense for your business. 11
PART 3 The Cloud Rush This cloud rains healthy cash flow, accelerates time to market, and lowers cost The view of cloud computing remains mixed as the technology brings benefits and risks in equal measures. 46% of companies surveyed Before the cloud “On the first day of launching a large In 2008, Aericon CEO Dean Whitney was online client project our web server said they planned to Digitas’ Vice President of Internet So- crashed. It was chaos. The campaign lutions. He managed a wide-range of was so successful that our websites invest heavily in cloud computing. A report campaigns that required hosting large were bombarded with traffic. And the amounts of data on servers rented from servers couldn’t handle it. We spent the by KPMG said, “the vast majority of senior third-party providers. whole day working on the servers get- ting them back online. If we were hosting executives surveyed expect Cloud invest- At the time servers were expensive and that data in the cloud, something like required constant maintenance to make that would have never happened. We ment in 2012 to skyrocket, with some sure they wouldn’t crash. would have hosted all that information on a cloud-hosted server space. It would companies planning to spend more than Cloud-computing wasn’t an option at that have programmed settings that would time. If it had been, Whitney wouldn’t have automatically increase bandwidth and a fifth of their IT budget on the Cloud encountered difficulties one August after- infrastructure to accommodate whatever noon during the launch of a web-based traffic we were receiving at that time,”12 next year.” client project. said Whitney
What is the cloud?When people talk about “it” being in the 2 Cap-Ex free computing: Will lead to a healthier cash flow. 4 Scale as needed: You can buy space on a public,cloud, what they are describing is any and You can rent server space from a cloud private, hybrid or community cloud.all of their data being stored on a server within minutes without the hassle ofthat can be accessed from any computerwith an Internet connection. Your com- building a server infrastructure, which can be expensive, time consuming, and 5 Lower maintenance costs: Less physical resources equals lesspany doesn’t own the server and doesn’t r equires the constant supervision of physical maintenance and power sage. uneed to maintain the server. The cloud specialized employees.enables the real-time delivery of Internet 6 Resiliency and edundancy: rcomputing services. 3 Deploy projects faster and foster innovation: If there’s an outage, cloud services are equipped with disaster recoverySix reasons why the cloud There’s nothing to install, you don’t need services.is awesome to network a new hardware server.If you haven’t staked your claim, it’s now Is there anyone who questions that thetime to figure out how to use the cloud to mobile Internet is here for good?b enefit your company. 1 Lower costs: A 2009 Booz Allen Hamilton (BAH)study concluded that a cloud comput-ing approach could save 50 to 67 percentof the lifecycle cost for a 1,000-serverdeployment . The 2012 Future of Cloud Computing Survey results (released on June 20, 2012 at the cloud leadership dinner) reveal several important changes in respondents’ perceptions and plans regarding cloud implementation. http://northbridge.com/2012-cloud-computing-survey 13
PART 4 Social Media Takeover Social connectivity is where influence takes place Dean Whitney talks social P eople are much more persuaded by If you can have an impact on them, they are more likely to tweet, blog and generate other people than they are by brands. that word of mouth message. If you think about all the people that are in Technology is catching up with human- ity in a sense. It’s forcing brands to make the market to buy a car, of those people, really cool content because you can’t buy which ones would you ask for advice on your way into the minds of consumers. which car to buy? Those are the people you Back in the recent old days, when a compa- ny did a product launch, they’d buy TV spots, want to reach and influence. website banner ads and other media buys. There’s absolutely no doubt that social networks continue to play an increasingly important part in many people’s lives. EMarketer predicts there will be a massive 1.43 billion social network users in 2012, representing a 19.2 percent increase over 2011 figures. http://www.emarketer.com/Article.aspx?R=100890314
Companies are forced to create unique c onsumer profile of each visitor is builtand engaging content because they’re no invisibly in the background.longer able to buy that kind of attention.Consumers ignore TV spots and banner For example, if you’re in the market for aads with DVR and car and start looking around on the Inter- net for one, what happens when you goThe thought process of a brand has to a web page is that there are real-timechanged from: “How can I force my brand bidding mechanisms in the backgroundmessage down the consumers throat” and in a split second the GM or Ford orto “How can I create really cool material Honda will bid to show you their ad, basedbesides the widgets I make or services I on how desirable your consumer profile is.offer. Content that people truly getexcited about” If your brand is active on Facebook and you create a compelling and engaging adWord of mouth is a lot cheaper than any campaign, and someone personally emailsother form of customer acquisition be- that ad to someone in their trusted audi-cause the lead is already a referral from ence, its going to hold more weight than aa trusted source. When you’re generating banner ad or TV spot.WOM referrals your close rate is going tobe much higher. That is always going to be What’s so compellingmore effective than regular discovery or about social? Today, marketing is driven more by hardpaid advertisement. How has traditional marketing been work- numbers than ever before. Decision-mak- ing for you lately? Is it generating the ers have the tools to tap into the pulseSocial media makes same leads it used to five years ago? Is of target customers, listen to what theyintroductions for you your cost per lead on the rise? want and give it to them.If there is a gadget website, I’m not going totell my grandma to go there, but if I know That question shouldn’t discourage This social revolution is an extremelysomeone that loves gadgets, I’m going to marketers to abandon traditional market- compelling reason to re-think, re-allocate,tell them about it. That WOM needs a much ing initiates — remember it’s a healthy and maybe increase your marketingmore targeted and effective message. balance between traditional and new-age budget. Because now we know where the marketing that will yield success. leads are coming from, we can measureHow the web works. what return there is on running a Face-For most people there is a behind- My point being, it’s not important whether book contest, and we see that strategicthe-scenes technology in web pages or not you’ve explored or supported social blogging is responsible for a rising in-that tracks their activity. As a result a media before reading this white paper. crease in web traffic and leads. 15
PART 5 The Facts That are Driving Change Six insights you won’t want to ignore 1 Sweeping change: With 20.4 trillion dollars up for vices. Executives indicate this digital metamorphosis ultimately will help grabs in the digital economy (according their firms provide more responsive to research firms IDC and iDate) we are customer care (60%), reduce the time heading into a major period of change. required to complete tasks (60%) and Mobility, cloud computing, business intel- improve employee productivity (58%).” ligence and social media will be restruc- turing and organizing both developed and developing economies. 3 The digital divide reverses: Cash rich companies in the devel- oping world are heavily investing in new 2 Industries undergo digital transformation: technologies…it’s becoming a desperate land grab in a virtual world where the It’s the only way they will be able to com- barriers have been breached. The deciding pete in a restructured global economy that factor may simply be a matter of attitude. is digitizing fast. a. the end of 2011 according to The At “While new firms will embrace the a. International Telecommunications digital marketplace straight away, Union (ITU) there were 4.5 billion e stablished firms will need to mobile subscriptions in the develop- Business effectiveness and productivity is not just making more stuff, but systematically figuring out the t ransform how they sell, price, pro- ing world. Mobile penetration in the16 right things to make. duce and deliver products and ser- developing world is now 79 percent.
4 The emerging-market: Customer takes center stage. 5 Business shifts into hyper-drive: 6 Firms reorganize to fully embrace theRapid economic growth, along with rising In today’s business environment real- digital economy:populations and income levels, are putting time business intelligence and predictive New lean and agile companies are storm-emerging markets at the center of corpo- analysis will be required not only for faster ing the new digital landscape, unencum-rate growth strategies. decision-making, but to cope with unex- bered by prohibitive rules and rigid poli- a. n markets like China and India, I pected market risks and opportunities. cies. The best method to adapt to change disposable income growth was soar- is to embrace it, companies like IBM are ing at 8%, at the time of this report moving towards a network structure as opposed to just 2% in the US and which is more market like and organic, 1% in Japan. April 2012, IBIS World globally integrating organizations that reports a further slow down to under can locate anywhere to take advantage of 1% for the US. low costs. FIGURE 3: China becomes the worlds largest economy 30000 China 25000 United States 20000 GDP, $ppp, billions 15000 10000 5000 0 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 17
PART 6 One Area CEOs Should Focus On in the Current Economy Dean Whitney, Aericon CEO W e have entered the golden age of design. From a product maturity perspective digital innovation has set the bar extremely high. Great design, func- tionality and performance have gone from being excitement factors to basic expectations.18
You need to look at the entire an email on their iPad while waiting at a network where you could share pictures?online brand experience. doctor’s appointment? Whatever the case New York Angel Chairman Brian Cohen the experience should be in line with your invested in Pinterest.This interface is open 24/7. Bright and brand promise, enjoyable and intuitive.shiny things easily sway consumers. How will you innovate?Especially when these links and images The social network Digg, once valued at More than ever, innovative businesses canare popping up in their streams and being $175m, just sold its remaining assets to disrupt the marketplace, defy all reasontalked about by their friends. the LinkedIn and the Washington Post and become successful. Clever ideas and for $500k. In 2008 MySpace was over- sweat equity can challenge competitorsIt’s hard to predict in what scenario your taken by Facebook as the world’s largest with much deeper pockets and greater re-audience will engage your brand. Will they social network. Instagram was bought sources. How will you innovate? How willbe doing a search on a smart phone after for $1 Billion while the one time leader you listen to your customers and strive toseeing something on TV that sparked Flickr’s future is in question. And who make your brand experience something toan idea? Will they be clicking a link from would have invested in another social talk about? FIGURE 4: Market Maturity Free Social Media Marketing Assessment For a limited time we are offering a free social media marketing assessment for quali- fied companies1. We Free will look at your digital Social Media strategy, website, Marketing Assessment social media busi- ness profiles and SEO, Social.Aericon.com discuss your objectives and provide feedback and insights. technology features experience 19
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