Digital Innovation and the Role Boston Consulting Group Digital Ventures will Play”

 

Babar: Hello and welcome to another edition of Ephlux Insights. My name is Babar Khan and I’m the Entrepreneur in Residence for this particular program. We’re joined today by Jeff, CEO of Boston Consultancy Group and he’ll be talking about the Digital world and everything that BCG is trying to do in this space and why it took so long to get to this level. Thank you for being on the program Jeff and taking out time for us. We’ve got quite a treat today where we’ve got questions that we’ve come up with and questions we’ve got from consultants and mobile and digital marketing experts from Hongkong, where we’re based and also Pakistan.

So, the first question comes from Dmitry Fedetov, CEO of Multichannel, based in Hong Kong. First of all, he congratulates you on becoming the CEO and says it’s great to see that BCG has created a separate division with specific focus on Digital but asks why LA has been chosen for the division against something like Silicon Valley and whether you’re rather media or technology oriented.

Jeff: It’s a good question. BCG in a sentence is an innovation, product development and commercialization company.

Innovation – it’s like we’re forming strategic alliances with our clients so innovation is very much like seek capital, product development is very much like venture capital in the community and commercialization is like real capita. The value changes with the clients, depending on what their needs are, and the ability to invest with them. And do many different things with them. We’ve been doing this for about 4 years and Los Angeles is like the perfect home for us to have startups, with more engineers than anywhere else in California – basically a hot bed of talent for us. Talent in both, technology and content sides. And this is what we do – we bridge technology and content.

Babar: another question from Dmitry is that what was the driving force to separate BCG into a separate entity, when the BCG perspective and whitepapers tell the story of your big history in this area,

Jeff: I would prefer to call it separate but perfectly integrated – the work is very seamless with our clients. Within BCG, we have capabilities within LA, but domestically we’re in LA, San Francisco, Seattle and Boston. We’re also in London and plan to expand to 3 other markets in Europe, as well as Shanghai, Dubai and Mexico City and Sydney giving us global capability. It gives 7000+ of BCG Consultants and 50 years of heritage in strategy and industries and marry that with our capability in Digital and strategy – which Is pretty much  a game-changer in the market.

Babar: wow, so a question that comes from our side is that what service do you see your clients most interested in? and what do they expect?

Jeff: We’re pretty broad based if you ask. We’re doing work in consumer, retail, health care, financial services, in industrials, in oil and gas. I’d say it’s more concentrated in consumer and health care and the reason behind that is that Health care could use a little leverage in digital as they are a bit behind n this compared to other industries. Retail can be said to be one of the most disruptive industries from the digital aspect. They’ve made a lot of investments but this needs to be a continuous process looking at the amount of disruption its facing,

Babar: That’s right. Now, another question from the team of Ephlux – Omni channel, it comes up as an interesting term when marketing has developed into a fascinating technology. As a consulting company, we assume that BCG will be asked by clients to develop such methods, before they run R&D. Are you interested in collaborating with existing players who have know-how of device targeting, re-targeting and other technologies or rather develop the IP yourself

Jeff: I would answer that in some parts.

The first part would be what we see in the market. We have a unique methodology. We don’t do market scans. We look ahead a number of years to see the technology that is coming and we have a unique way of doing that and so I give you a picture about the market, it would like if you see in the 90s, it was about Enterprise capabilities, Enterprise  apps from SAP to Oracle. In the early 2000s, it was all about getting the .com component into your business, which emulated into web com, and emulated into what’s called multichannel. We see the market going past this idea and what I deemed it to be is the ‘connected channel’. Your customer is going to be connected at the store, connected to his friends, connected while they’re watching television. So you have to re-imagine, not re-engineer fundamentally your business in the idea that it’s going to be a mobile-led world. The investments we’re making are around that. Our partnerships, because we’re very close to the venture community, we see the different startups that are coming. I mean 1500 startups that we have access to, that we are working at. All these technologies in the US, Latin America, Middle East and Asia. We’re working on the connected channel philosophy instead of multichannel in this mobile-web world

Babar: Brilliant. The next question comes from Faraz Ahmed.

He gives a little preface saying e-commerce is something we’re all aware of. It’s expanding quite a bit in Asia and southern Asia, yet a major percentage of shoppers still prefer to have offline experience. So, what can a person do to divert that to ecommerce platform?

Jeff: He’s quite right about ecommerce – it’s about 10% give or take of retail commerce. It is not a major part now nor will it be consuming majority of the commerce. We care a lot about where value is generated from businesses, and when we do that we do a lot of work understand the customer. A disproportionate of value is becoming prevalent, concentrated on a smaller part of your customers. If you take your customer-base and evaluate, you see that the top 10% generate a disproportionate amount of revenue.

I ran a retailer in the US a couple of years ago as part of a private acuity backed company and we found out that our top 10% held more than half of the revenue. We focus on the top 10 – who are the early adopters, quick to switch. Those top 10 are incredibly valuable to you. If you do further work, because commerce is so ubiquitous, working out how we stimulate everything like more items in the basket. In retail and commerce, you make money two ways: you make money when they come to you and how much they spend when they come to you i.e. frequency in basket. It comes back to the first point I made about connected – suppose your customer to be always on. Then, decide what investments to make across that value chain. Do that and you’re a winner.

Babar: Okay, question coming again from Faraz Ahmed, more as a concern related to his clients in South East Asia and Social Media (Especially Facebook) where brands are being marketed and promoted. The latest prediction states hat 70-80% of Facebook users might bid the platform goodbye. How do make use of the Social media in the best way, where businesses have focused their strategies on Twitter or Instagram, or Pinterest or any other platform, what are the aspects to that?

Jeff: Yes, whether you Facebook or you retail, you need to be constantly involved. If they’re not involved, they’re not going to be around. You need digital moves in a break-neck pace, means your neck will be broken if you don’t move (chuckles). In a consumer company, like ours, people try to run digital like they run analogue. So running a digital campaign and wait 90 days to see its response, follow with a digital campaign that has analogue aspect to it and wait another 90 days to see the results. But you don’t need to do that digitally. We’re working with clients and companies for technologies to see their social curve. We can see within 15 minutes where they lie with the social campaign, we’re working at a digital pace. We’re not working on an internal IP. We focus on what are the un-met needs. We see if we can provide a marketing mix that has facebook, twitter, social elements, ecommerce, in-store activities, app, what have you, all functional benefits that create convenience. But, if you don’t cater to the emotional needs, you’re not going to win. So what is an emotional need? Like this iphone (shows his phone) creates emotional need, which is not really the most technologically advanced phone in the market but people are brand loyal to it. Apple understood the un-met needs and tackled them well with the emotional needs of the people.

Having a Facebook or twitter account will make no difference to the brand unless there is an emotional attachment to it. Brand is how the customers feel USING your product / service. Invert this to see the needs and understand which aspect leads to adoption, and which adoption leads to the value that will grow your company.

Babar: Last question from Mustafa Bhaiwala, Business Unit Head, Large Consulting Firm. IS digital marketing more effective with specific products? Have buying patterns changed with digital evolution?

Jeff: Again, digital marketing can be far more effective than analogue if you understand the aspects of digital marketing. Don’t run digital like you run analogue! Now, there are of course certain products that you can sell online. Buying candy is impulse buying.

For the second question, we take into view the 2017 time. So today, mobile traffic is about 19% which will grow into a whopping 70% by 2017. If you talk about the top 10 customers, 99% of those transactions will be from mobile devices. Yes, buying patterns are changing and that is why you need to be always connected because your customer is always on.

Babar: Right. An article published a couple days back from BCG talked about e-friction and economic activity. Could you elaborate on that a bit?

Jeff: Haven’t read the report, but I would say that there are 4 disruptive forces affecting ecommerce that we tend to look at. First, the processing power. This is moving at a fast pace, like for example iPhone3, 3 years back and 3 years from now would be totally different. Second is interface with content. Google has come up with Google Glass that can capture content and then there’s Apple that has come up with many patterns, these wearable devices have come a long way.

Third is how you get content to the people. Commerce got the hockey stick shape or increased exponentially around broadband adoption. In three years, we’ll have 4G LTE in US, deployed in major markets.  Then there are the Wi-Fi (802.11) working on let’s say the Apple devices at a rate of 1 GB/s, which is substantially faster than the current broadband. There’ll be 3.5 connected devices per human by 2017! That’s 22 billion connected devices. It’s a common thing that 90% of all data lasts 2 years, 2/3 of that by consumers. There’s data explosion out there, so we don’t just do big data crunch, we do data visualization.

There’s too much disruption – industry barriers are going to break down, disruption that will create value for some and destruction for others. That’s what comes in the frictionless commerce.

Babar: I’m a fan of the articles on BCG Perspectives. An article 2 years back by David Deen Sebastian stated that by 2016, there’ll be 3 billion users globally and the economy will reach $ 4.2 trillion in the G20 economies. Also that 90% of the data that has been generated is what has been generated by the user in the past 10 years alone.  Now that we’re done with the external questions, I would like to know a bit about BCG, the product and digital innovation company. What unique objectives do you have for this year?

Jeff: Again as I said, BCG in a sentence is an innovation, product development and commercialization company. IT’s a market first – different than anything being done in the market because we’re not part of the design meets strategy fronts that are out there. We’ve moved to the disruptive area where we form strategic alliance with the client. We operate like a venture capital firm, but we’re wrapping the services around it. In BCG, we tap into the market know-how, and strategy, and product capability and marry that with the innovation and digital and functions that we carry in creating strategic alliances with our clients, there’s nothing in the market like that! Its’ pretty exciting!

Babar: One of the people you have on Panel by the name Imran Haq, based in New York and works at ZoHS, the Animal Health Business of Pfizer. They have an e-commerce portal of their own and consumers range from farmers, to poultry suppliers and even people with pets. IS this the direction you tend to take your people with? How do Adobe / Oracle Marketing Cloud come into play in your plans?

Jeff: There are lots of innovations there with consumer companies. Digital is not just about commerce or marketing. We call it Digital Operations, so it spans the value chains. We extract investments from these and put them in a single entity and then design it. We’re not consultants, we’re operators.  We go to our clients for funding and feedback. We’re here to create disruption, incremental value and to create sustainable and strategic value. We’re simply unique in our operations!

Babar: Alright. There is an idea of bringing in the digital marketing sort of companies that operate in Hong Kong they usually work on the perspective they don’t match with consulting firms, they come from the agency side. Digital marketing and digitization in the sense of something as simple as digitizing the documents of a company or something as simple as interpreting the idea of using mobile phones for example the iphone has an ibeacon embedded into it, Samsung has a device embedded into it that allows you to track location. This idea of introducing something along the lines of, there is business in the United States called Obivo, an application that you download on your phone that can track your location, and now there are many applications that go beyond that. You can track people’s attendance, you can track where users are moving around, you can add a note or a marker at certain outlets and then it would *ting* or send some sort of message to the particular user who has downloaded that application that you are in our vicinity, here is an offer just for you, just tailored for your exact need. So that is not exactly, again I went back on the tangent of additional marketing, but it can go beyond that so in terms of company to company collaboration, company to company product innovation, if a company must innovate a product within itself and they have a sort of red taped place or like you mentioned about issues between departments that occur in some organizations, like what can a company do, tapping into the digital frame into something along the lines of, like you mentioned, there would be 3.5 devices per person by 2015 as per Cisco’s report, what can a company do that has no interest in digital marketing or social media marketing, how can they tap into this digital revolution to take their business and their process to a whole new level.

Jeff: I’ll say to you thanks there. First of all, our methodology or our principles are simple but disruptive. Steve Jobs back in the day would say”it was beautiful” a word simple but disruptive, so the disruptive things we were just talking about and now let’s move onto the simple things. To create adoption, it has to be simple. You should know the Lowest Common Denominator – like the simplest digital thing will involve let’s say a smart phone, which is really a computer in our hands. WE need to see the simplistic needs of the people that will create adoption. We designed what we thought would take 9- 12 months, in about 8 weeks for $ 400,000 employ the smart phone’s capabilities (the camera is in effect a scanner!) so basically the simplistic un-met need that you’ve targeted using the Lowest Common Denominator.

Babar: We did a case study with Rizwan Jan and Omar Khan, who have been in the Microsoft Ventures in UK. They created an application that’s a God-sent to the people of the Third-World countries, especially in Hong Kong. The application, Vivid, would simply track that a person placed a call that didn’t get through and an available customer representative would then call back. This, too, was done by tweaking the capabilities of the phone and no rocket science there!

E-commerce is seeing a boom in Hong Kong, Pakistan and Afghanistan. For one example, food is being ordered online rather than on the call. One person in Washington DC, Kashif Rehman, setup this kind of business in 2003. Where do you see these kinds of businesses in the Developed Countries?

Jeff: I was the first to design such a website around Pizza industry. I’ve seen that people ordered more when they ordered online. A call is stressful and people feel ashamed of saying extra cheese or other ingredients let’s say. Online, it’s the user’s convenience. It’s like the Driver Networks in US, where the driver picks and drops you and you don’t have to tell him anything or tip him.

We think of ourselves as curators or architects. We’re not doing all the building, we need to fulfill the un-met need by working in a smart way – putting stuff together and integrating seamlessly. It’s not always technology that you need to be working at when you’re thinking of a solution. Maybe it’s human, so you look at Pandora, and it’s a great music service (humans behind it all!) So, when you understand this, you’re successful.

Babar: Another person I follow closely is Sasha Strauss, Director at Innovation Protocol and he talks about Brand Consistency. Do you second that or you believe in variations?

Jeff: A brand needs to stand for something or you don’t stand at all. You need to have a mission and a value – something that transcends your brand. Word / words should define the brand which can of course tree off to many marketing messages. I would prefer it to be how a person feels using your brand.

Babar: Professor Strauss stays on this ideology as well –Brands serve the customers. Brands are broadcasting and so are customers. So, a customer with a brand’s logo on them sends a message of representation. So, that’s there.

Lastly, I would like to discuss something around Google Analytics, which I discovered a few years ago. How do you see people moving from the amazing Google Analytics, which is free but provides a small picture to the Adobe Experience Manager or Adobe Marketing Cloud that defines analytics on a completely different level? How can Google compete?

Jeff: I would never question Google’s ability to compete. I see that as an ‘AND’ rather than an ‘OR’. I see people will be using both. I say that all departments should work together rather than in isolation because marketing and IT should be working together too – be on the same page! Our clients are a venture capital board and we work with funding and feedback. You need all the services and then there’s the function of how you use them to drive the business. When you approach it as a curator and the simplest way for the customer you see success. We play in offence, while companies are trying to survive the economic downturn playing in defense. Technologies or innovations didn’t slow down in the economic downturn; the companies didn’t invest in them.

Babar: A recent research by Trango was done asking about a 100 CMO’s about their accomplishment in 2013 and their plans for 2014. Majority answered that they were proud of their bend towards the digital and social side. For their plans in 2014, they said they didn’t see any progress in spite of the millions of followers and likes and they would focus on measurability and accountability of the Big Data. What is your say on this approach?

Jeff: Everything is evolving. As a CMO, you should be able to measure the progress, like before the CMOs used to buy the media, or print to get the message through but now there’s digital. Now, there are apps and we see that the process is difficult because on average CMOs run 19 months on a roll and that’s it. I’m being provocative but that’s there. The marketer has to collaborate with the technologist, finance and strategist because the innovation is on roll. We’re always meeting boards to deal on the whole and solve the problems of leaking. The rolls are morphing.

Babar: You’re right. Ali Nasim, an investor for Ephlux insights stated that after attending the Oracle Open World last year (just  7 months back!) that the CMOs were investing in the information technology budget. With experience, this demand generation and supply chain gap was recognized and Ali was happy to see the change and he recently became an Adobe Marketing Partner.  Lastly Jeff, one advice for everyone in this space.

Jeff: There’s a lot of demand out there. We, BCG, are doubling in size this year because we’re idea, innovation and strategy slammed together! My advice would be to link together the marketing and technology and the design aspect. The enterprise apps were hated because they forced the way to act. Now, it’s inverted – we make the design on the technology and that’s where innovation happens.

Babar: That’s brilliant. You’ve explained what agencies , clients and people who want to wear these shoes in the future should keep in mind and even how education should be designed to make sure students understand the concept – if not coding, then design, or even marketing! Business schools in Hong Kong are moving in that direction as well.

Thank you so much for such an educational conversation. It was great talking to you and we’ll surely talk again in a couple of months. It was an honor and all the best for doubling this year!

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