The Machine Learning Race Is Really a Data Race

MIT Sloan Management Review

Machine learning — or artificial intelligence, if you prefer — is already becoming a commodity. Companies racing to simultaneously define and implement machine learning are finding, to their surprise, that implementing the algorithms used to make machines intelligent about a data set or problem is the easy part. There is a robust cohort of plug-and-play solutions to painlessly accomplish the heavy programmatic lifting, from the open-source machine learning framework of Google’s TensorFlow to Microsoft’s Azure Machine Learning and Amazon’s SageMaker.

What’s not becoming commoditized, though, is data. Instead, data is emerging as the key differentiator in the machine learning race. This is because good data is uncommon.

Useful Data: Both Valuable and Rare

Data is becoming a differentiator because many companies don’t have the data they need. Although companies have measured themselves in systematic ways using generally accepted accounting principles for decades, this measurement has long been focused on physical and financial assets — things and money. A Nobel Prize was even awarded on capital asset pricing in 2013, reinforcing these well-established priorities.

But today’s most valuable companies trade in software and networks, not just physical goods and capital assets. Over the past 40 years, the asset focus has completely flipped, from the market being dominated by 83% tangible assets in 1975 to 84% intangible assets in 2015. Instead of manufacturing coffeepots and selling washing machines, today’s corporate giants offer apps and connect people. This shift has created a drastic mismatch between what we measure and what actually drives value.

The result is that useful data is problematically rare. There is a growing gap between market and book values. Because of this gap, companies are racing to apply machine learning to important business decisions, even replacing some of their expensive consultants, only to realize that the data they need doesn’t even exist yet. In essence, the fancy new AI systems are being asked to apply new techniques to the same old material.

Just like people, a machine learning system is not going to be smart about any topic until it has been taught. Machines need a lot more data than humans do in order to get smart — although, granted, they do read that data a lot faster. So, while there is a visible arms race as companies bring on machine learning coders and kick off AI initiatives, there is also a behind-the-scenes, panicked race for new and different data.

In finance, for instance, alternative data reaches beyond the traditional Securities and Exchange Commission reports and investor presentations that influence investment decisions. Alternative data, such as social media sentiment or number of patents awarded, is essential for two important reasons. First, traditional data focuses on traditional assets, and that isn’t expansive enough in the age of intangible assets. Second, there’s no reason to bother using machine learning to study the same data sets that everyone else in the market is analyzing. Everyone who is interested has already tried to correlate industry trends, profit margins, growth rates, earnings before interest and taxes, asset turnover, and return on assets — along with the more than 1,000 other commonly reported variables with shareholder return.

Looking for connections among the same sets of material that everyone else has isn’t going to help companies win. Instead, organizations that want to use AI as a differentiator are going to have to find relationships between new data sets — data sets they may have to create themselves to measure intangible assets.

Curate Carefully: What Do You Want to Know?

Data creation is more complex than simply aggregating point-of-sale or customer information and dumping it into a database: Most organizations mistakenly believe that an expedient path involves gathering every scrap of possible data and painstakingly combing through it all hoping to find a glimmer of insight — the elusive feature that predicts or categorizes something they care about.

While machine learning can occasionally surprise us with a flash of rare brilliance that no one has yet to discover, the technology isn’t capable of providing these insights with consistency. This doesn’t mean the tool is broken. It means we have to apply it wisely. This is easier said than done: For instance, in our research of the alternative data market, we found that more than half of new data providers are still focused on measuring physical and financial assets.

The step that many organizations omit is creating a hypothesis about what matters. Where machine learning really excels is taking an insight that humans have — one based on rules of thumb, broad perceptions, or poorly understood relationships — and developing a faster, better understood, more scalable (and less error-prone) method for applying the insight.

In order to use machine learning in this way, you don’t feed the system every known data point in any related field. You feed it a carefully curated set of knowledge, hoping it can learn, and perhaps extend, at the margins, knowledge that people already have.

Insightful Machine Learning Comes From Different Data

All this has three specific implications for companies wanting to create impactful and valuable machine learning applications:

Differentiated data is key to a successful AI play. You won’t uncover anything new working with the same data your competitors have. Look internally and identify what your organization uniquely knows and understands, and create a distinctive data set using those insights. Machine learning applications do require a large number of data points, but this doesn’t mean the model has to consider a wide range of features. Focus your data efforts where your organization is already differentiated. Meaningful data is better than comprehensive data. You may possess rich, detailed data on a topic that simply isn’t very useful. If your company wouldn’t use that information to help inform decision-making on an ad hoc basis, then that data likely won’t be valuable from a machine learning perspective. An expert machine learning architect will ask you tough questions about which fields really matter, and how those fields will likely matter to your application of the insights you get. If these questions are difficult to answer, then you haven’t put in the thought needed to produce practical value. What you know should be the starting point. Companies that best use machine learning begin with a unique insight about what matters most to them for making important decisions. This guides them about what data to amass, as well as what technologies to use. An easy place to begin is to scale and grow a piece of knowledge that your team already has and that could create more value for the organization.

It’s clear that software has eaten the world (a phrase coined by software entrepreneur Marc Andreessen). But it is still hungry! Software needs a steady diet of new data combined with new technologies to continue adding value.

You don’t want to be left behind by this shift in insights, machines, and alternative data. Start looking internally to identify your unique perspective and the valuable, alternative data you could and should produce. It’s from those steps that you’ll discover the related insights to keep your organization competitive.

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Kamyar Shah

Fractional Remote CMO

Fractional Chief Marketing Officers: Is Hiring One the Right Move for Your Company’s Bottom Line?

What’s up next for your company? Are you launching a new product or merging with another business and in need of some rebranding to fit the new deal? Maybe you just need to get the hang of using social media more effectively or mainstreaming your current projects so that you have increased profits and productivity. When it comes to marketing, your company requires somebody with a specific set of skills and a knack for getting things done. Even so, this doesn’t necessarily mean that you need to hire a new, full-time employee. Before you add another name to your permanent payroll, consider whether a fractional chief marketing officer might better fit your company’s needs instead.

What Is a Fractional Chief Marketing Officer?

Simply put, a fractional chief marketing officer is someone who spends a portion of his or her time consulting for your company. When the individual isn’t working to help you build up your own business, he or she spends time consulting for other companies. Fractional CMOs often have specialized skill sets that benefit a company part of the time but that don’t make sense to use on a full-time basis.

Are There Different Types of Fractional Chief Marketing Officers?

While most fractional chief marketing officers have the same basic set of qualifications in terms of education and necessary skills, they tend to separate their duties into four different categories. The most common type of fractional CMO is the part-time, temporary contractor, also known as an on-demand CMO. This type of individual works for a specified amount of time and provides executive leadership to create marketing tactics and strategies that ensure the company sees a rise in profits. The three other types of temporary CMOs include the following:

Advisory CMO Sometimes known as a coaching CMO, an advisory CMO helps to train your current marketing team by teaching them to hone their skills, such as thinking more strategically and implementing those strategies in a more productive manner. Interim CMO An interim, or provisional, CMO works as a bridge between the time at which your former full-time executive resigns and when the company hires a permanent replacement. This contractor helps to maintain daily operations and may even assist with the interviewing process for a replacement since he or she has more specialized knowledge than the broader human resources department. Turnaround CMO Also known as a revitalization CMO, this person is responsible for helping a company turn things around when its marketing team isn’t performing well. He or she may nix some projects, tweak others to be more effective, or create entirely new strategies to build a better business.

What Does a Fractional Chief Marketing Officer Do?

A fractional chief marketing officer performs a range of duties that depend on what the company needs. For the most part, the job entails providing insight, creating strategies and executing those strategies to raise profits and create better brand awareness. The fractional CMO works in five distinct categories: the market, the company, the product, marketing the product and creating the execution pipeline.

The process begins by assessing the company’s perspective and then gaining product-specific market insight. This involves determining the current need for the product as well as the potential need in the future, analyzing the competition, gathering information about the current customer experience and determining the size of the market now and in the future. SWOT analysis (determining a company’s current strengths and weaknesses) and segment analysis are also important parts of the job.

After the CMO gains enough insight into the company and its product, he or she creates strategies for both. In terms of the company, tasks include assessing its branding, creating a market alignment strategy, determining market segmentation and value proposition, and creating an overall go-to strategy. When it comes to the product itself, the CMO plans the product from idea conception to launch, determining its pricing and how to be innovative in getting the product out the door and into customers’ hands. This also includes branding it, such as its packaging and delivery, and positioning it in the market.

Once the planning process is complete, the CMO can finally begin to execute the plans. Marketing is an important part of the implementation. The CMO must create the optimal mix of different types of marketing, such as communications and public relations, digital marketing, social media and appealing to any customers who are already loyal to the brand. Throughout the process, he or she must also measure the metrics to determine if the return on investment (ROI) is at an optimal number and, if it isn’t, reevaluate and change the strategy as needed. Once ROI is optimal, the fractional CMO can create a pipeline that automates marketing, tracks lead generation, aligns and enables sales, and finally, teaches the permanent marketing team how to maintain this level of ROI.

Why Do Companies Hire Fractional Chief Marketing Officers?

A company may decide to hire a fractional chief marketing officer for a variety of reasons. One of the biggest is because it simply can’t afford to put someone on its staff full-time at the moment. Because a fractional CMO is usually considered an independent contractor, the company pays only for the services it needs and doesn’t have to provide a full-time salary, healthcare benefits or any of the other costs that are often associated with bringing on a full-time employee.

Fractional CMOs are especially helpful for situations that require their expertise but aren’t expected to last forever, such as when a company is rebranding or if it is launching a new product on a large scale. In addition to being experienced in helping companies perform these large tasks, which require strong strategic planning, a CMO who doesn’t work with the business all the time is likely to offer a much different, often better perspective than what the executives thought of on their own. This is especially helpful for a business that is rebranding or otherwise needs to gain an improved reputation.

Perhaps a company isn’t necessarily rebranding or launching a new product but is realizing the importance of having a solid digital marketing strategy. A fractional CMO should be adept at every type of marketing, and that includes the increasingly popular and necessary digital strategies. The chosen CMO can help the company create a more user-friendly website that works across mobile devices (very important since almost every consumer searches the internet on the go now) and can also teach the proper full-time employees how to create social media accounts and use them effectively. These always include Facebook, Twitter and LinkedIn, and, depending on the type of business, may also include Instagram, Pinterest and Snapchat.

Before the time with the company is over, the fractional CMO can also teach someone how to properly monitor and tweak search engine optimization for the website and social media accounts. SEO is the use of keywords, image tags, link structure, incoming and outgoing links, title tags and more, and each component determines how many visitors are checking in, what they’re looking at and how long they’re sticking around. Proper use of SEO also helps a company’s website and social media accounts rank higher in search results on Google and other search engines.

What Are the Benefits of Hiring a Fractional Chief Marketing Officer?

One of the biggest benefits of hiring a fractional chief marketing officer is its cost-effectiveness. Adding a full-time employee when you don’t have full-time needs does more harm than good to the company budget, but hiring someone on an as-needed basis often means larger profits. Hiring an as-needed professional further proves its cost-effectiveness and even boosts company productivity because you won’t need to train current employees to take on new jobs, leaving them free to handle their current daily duties more effectively. This is also beneficial because your employees won’t feel stretched too thin, which means they’ll have better overall morale and provide better work within their assigned tasks or departments.

A fractional CMO often provides a better quality of service as well. A full-time CMO must handle all aspects of marketing for the company, from the smallest product to the largest, but hiring a chief marketing officer to handle a specific task or product launch means the individual can put his or her specialized skill sets to better use, creating a better-quality campaign and product launch that lends itself to more publicity, bigger influencers and a larger, more lucrative rollout. Someone with a special set of skills often knows how to manage time more effectively as well, meaning a speedier job on top of a more productive one, which is likely to further increase the company’s return on investment.

How Do You Determine if a Fractional Chief Marketing Officer Is Right for Your Company?

Now that you understand what a fractional chief marketing officer does and why one might benefit your company, you can ask yourself a few questions to determine if it’s the next move you should make for your bottom line. First and foremost, consider your upcoming product launches or other rebranding initiatives you may have on the horizon. If you already have a full-time CMO, there’s no reason to hire a fractional one; on the other hand, if you don’t have a full-time person in charge of your marketing endeavors, hiring a part-time one could be the best idea for the company budget.

What about if your business needs to bring in a new perspective? The old saying goes “if it ain’t broke, don’t fix it,” but what if it just isn’t working as well as it used to? Just because something isn’t entirely broken doesn’t mean it won’t benefit from a few tweaks. In the case of lessening profits, a fractional CMO may be a good idea even if you already have a full-time marketing team. The combination of a fresh pair of eyes on your company’s current product line and a specialized skill set like that of the part-time CMO may help you find new ways of doing things that create a better return on investment.

Has your current full-time chief marketing officer turned in a resignation letter? This is an excellent reason to hire an interim CMO. Rather than rush through the interview and hiring process to fill a full-time position, which could lead to accidentally hiring someone who is underqualified or otherwise doesn’t fit in with the company culture, go the route of a fractional CMO. This interim member of the team can not only keep the daily operations on task but can also assist the human resources team with finding a suitable full-time replacement.

Finally, you may need a fractional chief marketing officer if you simply feel that you have too many unfinished marketing projects. Just like individuals, companies sometimes get into a rut of creating too many good ideas but never following through on any of them. A fractional CMO with a new perspective and specialized skill set can help the business find the motivation to see its current branding and marketing ideas through to the finish line, or if they are no longer relevant, tweak them so that they are.

Getting Started on the Path To Hiring a Fractional Chief Marketing Officer

Of course, just because the fractional chief marketing officer you hire will only be working with you for a short time doesn’t mean you should skimp on the interviewing process when choosing one. After all, this contractor will be responsible for helping to launch a product, creating a better branding strategy and bringing in a better return on investment, so you want the individual to do the job right. When seeking a person to fill this position, it is important to hire someone who is dedicated, passionate, knowledgeable and experienced. Don’t be afraid to ask questions, verify credentials and speak to references to ensure you hire just the right person. Kamyar Shah is an example of a highly qualified consultant who enjoys helping every company he works with. Contact him today to learn more about hiring a fractional CMO and the services he provides.


Fractional Chief Operating Officer

Advance Your Growing Business With a Fractional Chief Operating Officer

Running a growing business is an exciting and fulfilling experience. However, it is not without its challenges. One of the most common is deciding when to create new positions. For example, your business may need the experience and insight of a chief operating officer but not yet have the need for a full-time executive. A fractional chief operating officer may be the answer you’ve been looking for.

What Is a Fractional Chief Operating Officer?

A COO is a top-level executive whose primary focus is on the operations of the business. The right COO can improve your productivity and efficiency. Many companies forgo this role during their initial stages. This creates a gap in which the company has some need for a COO but not enough to justify a full-time position.

A fractional COO is a consultant who functions as a part-time chief operating officer. Your company gets the insight of a top operations executive without having to bear the full-time cost. It is a powerful way to achieve your organization’s goals in an affordable manner.

What Does a Fractional COO Do?

The job functions of a fractional COO are largely identical to those of someone in a full-time position, only the job duties are performed part-time and/or on a temporary basis. However, the purpose of the fractional option is often a little different and more specific than that of the full-time individual.

A full-time COO is in charge of the daily operations of the organization. Basically, he or she is the executive who oversees the functions related to creating and distributing the products and/or services the business sells. In a new or growing business, these functions may be performed by the founder and/or the top executive, often the CEO.

One of the key roles filled by the COO is ensuring that the business’s operations run smoothly and efficiently. This can be through analyzing, organizing and/or improving the company’s processes and allocation of resources. It is in this area that a fractional executive offers the most value.

All businesses have limited time, monetary, human and other resources. Applying this capital efficiently can be the difference between success and failure. For a growing business, greater efficiency can significantly accelerate expansion.

A fractional COO will help to oversee and improve several aspects of most businesses.

Allocate resources to generate the maximum possible value Translate the company’s strategic goals into operational actions Assist with planning based on stakeholder requirements Monitor and streamline staffing Oversee knowledge management and sharing Enable the executive team to have greater visibility of key performance indicators Plan and implement processes that support all the above

Most companies use a fractional COO for around one or two days per week. However, you can use the service however much or little your business needs.

Key Benefits

The most significant benefit of a fractional COO is getting the experience and ability of a senior operations executive at a substantial discount. Many growing companies opt to hire a less-experienced individual full time. This option is often more expensive and less impactful than engaging a fractional chief operating officer.

By bringing a wealth of experience to your organization, a fractional COO can help you in many ways. Here are just a few possible benefits:

Offer insight into process best practices: The processes that work for a start-up business can be significantly different from those of an established business. Having someone with insight into which practices work and which don’t can be very valuable. Provide unbiased and experienced assistance with strategic planning: A COO is typically a central part of planning for the future. He or she is charged with not only creating plans but also translating them into daily operations. An experienced perspective can help you make the right choices for your business. Align organization’s teams and their communication as an outside expert: Weakening communication is a familiar growing pain for many businesses. This is especially true as they transition from the start-up phase to being a more established organization. A fractional COO can help you to overcome those obstacles. Ensure success by offering capable project management skills: Critical projects often need an experienced hand to guide them. It is common for COOs to directly oversee the most important projects. This can be the key difference that leads to lasting success. Enable better budgeting through a focused review of operations programs: A fractional COO can analyze and develop the budgets of your programs. This can help ensure better allocation of resources while also improving your insight into how your business spends money.

There are many other benefits to hiring a fractional COO, but they all translate to greater efficiency, profits, and growth. Simply having an unbiased, outside perspective brought in can be a major boon to your organization. When that perspective is built upon experience, the effect is magnified.

Beyond simply making your company run better, a fractional executive can also help you prepare your business for the future. Growth brings new challenges, and expanding organizations need to consistently adapt to match their business operations to their size and capability.

The Value of Timeliness

Another important benefit of a fractional consultant over a full-time employee is the time needed to get started. Hiring a new executive can be a significant resource investment. It can take months to find the right candidate. Even after finding the right person, it usually takes at least two weeks before he or she can start.

A fractional COO, on the other hand, can potentially start as soon as you engage him or her. As the individual works as a consultant, the only barrier to starting immediately is having sufficient schedule time.

Similarly, your relationship with this individual can be temporary and can be concluded relatively promptly. This temporary nature is significant because it means you can have a fractional COO when you need one and not when you don’t.

How Can Your Company Use a Fractional COO?

There are numerous ways that companies use the services of a fractional COO. One of the great benefits is that he or she can work on the tasks that will bring you the most benefit. Some possible job duties include the following:

Assessment: Legacy processes are sometimes the greatest obstacles to success for growing companies. You can use your fractional COO to assess your current methods of operation and offer advice on how to improve. Even small increases in efficiency can lead to significant improvements in profitability and growth over time. Executive Project Management: The most important projects need the right set of hands to guide them. Consider using your fractional consultant to act as the manager for your most critical projects. This could be a broad, executive undertaking such as transitioning to a new system of organization or a specific, high-priority project such as delivery of an important product. Interim COO: Whether you have had a COO before or not, you may find yourself with a need for a temporary hire while you find the right full-time candidate. A fractional executive can be the perfect option for fulfilling this need. If you are preparing to hire your first operations chief, having a test run with a part-time consultant may be advisable. Alignment: One of the challenges to organizational success is teamwork. Whether you have a small team or a large one, helping people from different disciplines work together well can be hard. Your consultant can help you to not only align your teams with each other but also with your strategic goals. Planning: If you are developing your plans as your company enters a new phase of growth, a fractional COO can offer advice and experience. Alternatively, if you already have goals set, he or she can help you turn those goals into reality. Improvement: Sometimes your business operations teams don’t perform at the level you need them to. Your executive can help you to find the right personnel and make necessary changes to increase effectiveness and efficiency. Reporting: Understanding what is happening in your business can become difficult as you grow. Reporting metrics and analyzing key performance indicators can help you have better insight. Your consultant can help you develop the reporting practices as well as the analytics to fully understand what is being reported.

Chances are, as a company founder or executive, you have taken on many of the most essential roles of a COO yourself. Having a fractional hire means that your company will have an experienced and focused individual handling your operations. Additionally, it means you will be able to spend more time on the strategic growth of your business rather than on running all of its day-to-day functions.

Effect on Silos and Communication

Many growing organizations experience issues with operational silos. These occur when different units don’t communicate effectively with each other. One of the key responsibilities of a COO is to ensure that silos don’t exist or are broken down if they do.

Silos can lead to misalignment between groups. This can have some pretty significant impacts on the company as a whole.

Inefficiency caused by groups being out of sync Poor understanding of the effect of each team on the larger picture Errors resulting from poor communication Low adaptability to new opportunities and challenges

A fractional COO can address these silos and improve alignment. The outcomes of breaking down silos are worthwhile for almost any organization.

Improved visibility for every team and individual of the rest of the organization Better communication between teams about current activities, goals, and obstacles Superior organizational foresight for future roadblocks and bottlenecks Enhanced feedback loop throughout the company More flexible approach to new opportunities and challenges Lower chance of errors occurring and a better ability to respond to them More competitive value proposition to customers Stronger cultural development

Perhaps the most significant issue with organizational communication is that the needs change as the company grows. In fact, even as new products are created, new customers are found and new technologies are leveraged, communication needs change. Therefore, having a fractional COO who can help you respond to the ever-changing teamwork dynamics of your business can be immensely valuable.

When Is the Right Time To Hire a Fractional COO?

One of the best qualities of a fractional executive is the flexibility. You can hire a fractional COO for four hours per week if that is all you need. The right time to start working with one is whenever you have a need for operational improvement.

Chances are that if you are asking yourself this question, you already have some need for assistance in running your company’s operations. Consider starting with a consultant on a short-time, limited basis to determine how much value he or she can bring to your business.

If you are certain that you need someone to fill an operations executive role but aren’t sure whether to hire a full-time individual or not, a part-time team member is likely the right choice. You can engage a fractional COO full time on an interim basis if needed. This will provide you with a chance to evaluate your needs and the impact of an operations chief.

In short, fractional executives are great for businesses of various sizes and in differing stages of growth. Since you don’t have to make a long-term commitment, simply starting a trial run is often a smart move.

Find Your Fractional Chief Operating Officer

Having a fractional chief operating officer is an excellent way to get the valuable benefits of a COO without the sizable cost. This service can also be a useful opportunity to try out the COO role without having to commit to a full-time hire. In short, if you have been wondering whether your company needs an operations chief but aren’t fully committed yet, a fractional consultant may be the right answer.

Kamyar Shah is an experienced executive and consultant who can provide the fractional COO services your business needs. He has worked in strategy, management, operations, marketing, business development and more. Click here to contact Kamyar Shah to learn more or to engage him as your new fractional chief operating officer.
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Companies increasingly use digital technologies to circumvent distributors and enter into direct relationships with their end-users. These relationships can create efficient new sales channels and powerful feedback mechanisms or unlock entirely new business models. But they also risk alienating the longstanding partners that companies count on for their core business.

The auto industry is a case in point. Porsche’s Passport program allows consumers to subscribe via a phone app to a range of vehicles for a fixed monthly fee. Your chosen Porsche is delivered to your house with insurance and maintenance as well as unlimited miles and flips to other models included. But if you’re a Porsche dealer, how do you like this idea? Now consider that similar subscription services are being offered by Volvo, Lincoln, BMW, and Mercedes, with more to follow.

These direct-to-consumer offers threaten the very livelihood of dealerships, who historically have owned the customer relationship. And many dealers are pushing back. The California New Car Dealers Association lobbied for a law that required subscriptions to go through dealers. Volvo’s program has elicited so much criticism that dealers have mobilized the Indiana state legislature to outlaw the business model.

This is but one example of the digital Catch-22, the dilemma that most manufacturers and service companies face when creating new distribution channels. As a result, many B2B companies remain stuck in a stalemate. Writing in the Sloan Management Review, Boston College professor Gerald Kane noted that 87% of executives surveyed indicated that digital technologies will disrupt their industries to a great or moderate extent. Yet fewer than half felt that their companies were doing enough to address this disruption.

We frequently find that executive teams understand the potential of a reinvented distribution strategy; however, they are unclear on how to proceed. While the opportunity is compelling, so is the potential to upset existing distribution partners and thereby damage the core business. Disgruntled distribution partners may retaliate in ways such as switching to rivals, favoring competing products, or even lobbying for legislative remedies.

How can companies position for the future without putting their current business in jeopardy? Here are three strategies for developing digital distribution approaches that minimize risk:

Embrace Stealth

In the past, companies looking to test new business models could quietly enter a new geography free from restrictive distribution contracts that limit their ability to go direct in their traditional geographies. But that is harder to do in the digital age, as customers and partners anywhere can easily see what you’re doing online.

Alternatively, the company can operate in stealth mode by targeting customer segments that have been poorly served or ignored by traditional distributors.

Recently, Verizon quietly launched a startup called Visible which offers no-contract mobile phone service subscriptions for a $40 flat fee and is only available for purchase through an app. This model competes mainly with smaller-brand, low-end providers and may not be seen as a direct threat by Verizon’s massive distribution network of company-owned, partner, and authorized reseller stores that are selling higher-margin services.

Sometimes, an entirely new product provides the right entry point. Starting in 2011, Mercedes chose to develop direct distribution capabilities for electric bicycle sales under its Smart brand.

Mercedes’ strategy preserves its traditional distribution network for its major lines of vehicles, while enabling the company to build the capabilities and infrastructure needed to support a reinvented distribution strategy — selling to consumers rather than through traditional dealerships.

Create Hooks

Distribution partners willingness to retaliate can be minimized if companies are able to create hooks that compel and reduce their negotiating leverage. There are many ways to build hooks, including bundling products, monopolizing a category, or developing features that are indispensable to a subset of customers.

For example, Cree Inc. made a splash when it introduced affordable consumer LED lightbulbs in the early 2010s. For several years the company was both a cost and product feature leader in the category. This enabled Cree to command significant shelf space in Home Depot, while simultaneously building a direct-to-consumer business. During this period, Home Depot was compelled to carry Cree products. This dual distribution strategy resonated with both consumers and investors — as Cree’s stock price tripled from 2011 to 2013.

In 2012, with the launch of the Surface product line, Microsoft began directly competing with the manufacturers and OEMs who had been its distribution partners for decades. Microsoft was able to do so largely due to its monopolization of the desktop operating system market. Traditional Microsoft partners such as Acer, Lenovo, HP, and Dell were already hooked on Windows and had little choice but to accept Microsoft’s direct-to-consumer strategy.

In fact, many of Microsoft’s partners, at least publicly, were supportive of the Surface. In 2012, Acer’s founder, Stan Stinh, indicated that he believed the Surface was only intended to stimulate market demand and that “once the purpose [was] realized, Microsoft [would] offer more models.” Today, the Surface product line has a greater share than Acer does in the U.S. market for personal computers.

Minimize Pain

Supporting downstream partners’ business can also reduce the risk of retaliation.

The heavy equipment manufacturer Caterpillar, for example, introduced a vehicle management platform that provides customers with insights on vehicle utilization, health, and location. The platform is sold directly to customers — frequently removing downstream partners from the sales process. Ultimately, though, the platform benefits partners because it alerts customers when they need to get their equipment serviced by these local partners — a key revenue stream for Caterpillar’s distributors.

UnitedHealth Group, one of the largest health insurers in the U.S., is on the verge of becoming the nation’s largest employer of physicians. But under its subsidiary Optum, UnitedHealth Group has pursued an aggressive M&A strategy to build its direct-to-consumer capabilities while being careful to not upset traditional healthcare providers. For example, Optum has continued to accept over 80 types of health insurances across its facilities and has avoided restricting United insurance customers to Optum-owned providers. Optum’s deliberate strategy has caught the industry’s attention, but to date has avoided direct retaliatory actions by incumbent healthcare providers.

Digital represents a significant opportunity for many B2B companies, but also risk. Failure to act enables competitors and new entrants, while action risks retaliation from existing partners. To break this stalemate, leadership should align on the imperative to act, acknowledge the risks of action, and identify the right strategy with which to move ahead. Your long-term partners are more likely to stand by you if they see your direct-to-consumer move not as an act of aggression but as a plan for growth.

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For startups, 2009 was a good year. More than 20 companies launched at that time, including Uber, Slack, Pinterest, and Blue Apron, eventually achieved $1 billion-plus valuations. Given that those companies were all venture-financed and emerged from Silicon Valley, you might assume that the key ingredients that have ensured their success were cutting-edge technologies, digital platforms, and customer bases that were chiefly made up of digital natives. You would be wrong.

Yes, those companies had great technologies, platforms, and demographics, but the secret of their success turns out to be much more prosaic. Each was able to satisfy real customers who needed real jobs done — and by jobs, I mean a fundamental problem in a given situation that needed a solution. In other words, they had great business models.

Every successful company, whether it knows it or not, owes its success to its business model. I explained this in an article that was published in Harvard Business Review in 2008, before any of those companies began, and, now, 10 years later, that still holds true, as more and more of the business discourse is focused on digital transformation. A digital platform, or a digital solution, may enable a new epoch of transformative growth, but when you get under a company’s hood and look to see what’s really driving it, the engine of transformation turns out to be its business model.

In my article, I identified the four interlocking elements that, taken together, create and deliver value to both companies and its customers:

Customer Value Proposition (CVP), which is a way to help customers get a job done. The more important the job, the lower the level of satisfaction with other companies’ attempts to solve it, and the better and cheaper your solution is than theirs, the more potent your CVP.

The second is a Profit Formula, or how you create value for yourself while providing value to a customer. There are four essential elements to the formula: revenues, cost structure, margins, and resource velocity. The best way to create a profit formula is to work backwards, either starting with the price for lower cost businesses that is required to deliver the CVP, and then determining what the cost structure and other factors need to be or in highly differentiated businesses, start with the needed cost structure and margins that leads to the required price.

Key Resources are the assets that are required to deliver the CVP to the customer at a profit, meaning the people, technology, products, facilities, equipment, channels, and brand.

Key Processes are the operational and managerial capabilities that allow a company to deliver value in a way that can be repeated and scaled. These include manufacturing, budgeting, planning, sales and marketing, and customer service.

Successful business models have an exceptionally strong CVP, and a stable, scalable system in which all the elements mesh together seamlessly while complementing each other. As simple as this framework may seem, its power lies in the complex interdependencies of its parts. Major changes to any one of these elements affect the others and the whole.

Mature companies often look wistfully at successful startups like 2009’s class of unicorns and wonder if they can reinvigorate themselves by adding a digital component to their existing business model, in the way that clamping an outboard motor onto a rowboat makes it go that much faster. But what made each of those companies so valuable wasn’t their digital auspices — it was their powerful Customer Value Propositions, which investors believed they could deliver at profit and at scale. Being able to hail a car with your smart phone (a car that is driven by a self-employed contractor, who pays for most of the overhead him or herself). An instant messaging system that also allows for collaboration at work. A social media site that allows its users to visually share their interests with each other (and with advertisers, who sponsor content and pay for user data).

For an example of digitally-enabled business model transformation, consider Domino’s Pizza, which has experienced a massive turnaround since 2010. Forbes hailed it as a veritable case study “on how digital transformation leads to business value.” That Dominos has undergone a transformation cannot be disputed — an investor who bought $1,000 worth of Dominos shares in 2008, when it was on the brink of bankruptcy, would be able to sell them for more than $80,000 today. By comparison, $1,000 of Chipotle stock purchased the same year and sold at its peak in 2015, before the e-coli scare, would have only been worth about $5,000.

Along with introducing product innovations such as improved recipes and new menu options, Domino’s improved its processes around ordering and delivery by bringing its e-commerce technology in-house. Today, more Domino’s pizzas are ordered via digital devices than by phone.

But digitization was just the first step in Domino’s transformation. As it improved its online and mobile platforms, it introduced heavily-advertised features such as pizza profiles, which allowed users to order more easily, and loyalty programs, which boosted frequency of use. Domino’s transformation was enabled by its online storefront, but it worked because it successfully attracted and retained new customers while turning occasional customers into dedicated fans, at the same time that it extracted more value from each transaction.  More than that, it changed its branding and its relationship to its customers by making the experience of ordering pizza fun — which was the missing piece in Dominos old CVP. Now customers can play “Pizza Hero” on their iPhones after entering their personalized orders, or watch a clock click down the time to their pizza’s delivery.

Building its own digital platform was a game-changer for Dominos, but it’s not what changed its game. It did that by strengthening its CVP (adding more in the way of both convenience and fun), its Profit Formula (by increasing its volume and its resource velocity), and by upgrading the resources and processes that it needed to support them.

Any consumer or service company that doesn’t have a digital component certainly should; this is 2018, after all. But the key to transformational growth is still a powerful and coherent business model.

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Not a month goes by without a major corporation suffering a cyber attack.  Often state-sponsored, these breaches are insidious, difficult to detect, and may implicate personal information relating to millions of individuals. Clearly, the current approaches to safeguarding sensitive data are insufficient. We need to reorient expectations for the role of the private sector in cybersecurity.  As the risk of cyberattacks has become better appreciated, we see an increasingly punitive focus on holding corporate America solely responsible.

Multiple, overlapping laws at the national and state level require companies to have “reasonable” security, a concept that is largely undefined and elusive, especially given that threats and available defensive measures constantly evolve. And regulatory enforcement actions and lawsuits in the wake of cyberattacks declare any exploited security vulnerability to be de facto “unreasonable,” without a meaningful assessment of the company’s overall security program or acknowledgement that the company has been the victim of a crime.

This approach is premised on an unreasonable expectation that every company in the United States has the resources and capability to defend itself against even the most sophisticated cyber actor.  We should move away from laws that focus on finding companies at fault, rather than as victims of criminal cyber activity.  This framework is neither fair nor effective in improving our collective cybersecurity.

In our experience, despite increasing security spend, most companies face significant obstacles to successfully managing cyber risk.  Although some industry security standards have emerged, they are  vague, and available security solutions are seldom turnkey.  Rather, effective security requires application of significant judgment in the context of unique and complex corporate network architectures, as well as the ability to adapt as security solutions and threats evolve.  Unfortunately, the talent pool with the requisite cyber experience and knowledge is limited.  It is simply not possible, at present, for every company in America to have sufficient internal cyber expertise to manage the risk.

The challenge is compounded by the resources and sophistication that state and criminal cyber attackers can bring to bear.  In no other arena do we expect every business to defend itself from foreign intelligence and military agencies or sophisticated criminal threats.

Although there has been a significant focus on sharing threat information, both within the private sector and between the government and the private sector, such sharing remains incomplete at best, particularly when it comes to the techniques, tactics, and procedures that particular actors are employing.  As a result, companies often lack sufficient knowledge of the specific threats they face so they can best defend themselves.

Given these and other factors, companies that suffer cyberattacks are, and should be treated primarily as, victims.  When a bank suffers a physical robbery, we do not think of blaming and shaming it – even though there is almost always some additional precaution the bank could have taken that might have helped prevent the attack (such as a police officer stationed at every teller window or limiting customer access to tellers).  While banks are expected to implement some security measures, there is no expectation that those measures will prevent criminal attacks entirely, and banks are not vilified if they did not have every available precaution in place that might have prevented them.  Yet in the cyber context, a company that suffers a breach faces a substantial risk of multiple regulatory investigations and class action lawsuits, all focused on assigning blame to the organization for having inadequate security measures to defeat the criminal attack perpetrated by others – no matter the strength of the company’s overall security program or the amount of the investment it has made in security.

That perspective is not only unfair, but counterproductive.  Instead of focusing on remediating the incident, restoring operations, improving security going forward, and mitigating potential harms, a company in the midst of a cyber breach also needs to worry about the record that is being created – what is being written down, whether lawyers are sufficiently involved in the forensic investigation, and other considerations bearing only on protecting against liability.  Moreover, the fear of potential downstream liability constrains what information a company is willing to share – it may not disclose the incident at all, let alone how and why the intruder was able to evade existing security measures, depriving the broader community of the opportunity to learn lessons from the incident, as happens in aviation and other industries.

Although the Cybersecurity Act of 2015 provided some protections, they are narrow and have not resulted in a material increase in information sharing.  As a result, our collective cybersecurity is diminished:  we do not harness the enhanced security or efficiencies that a more collaborative approach to threat intelligence and defense would yield.

We need to reorient our cybersecurity focus.  We should place less burden on individual companies by focusing more on systemic ways to address cyber threats.  In part, that approach would require the federal government to take a more active role in cyber defense.  The government has a number of comparative advantages over the private sector, such as the ability to collect and exploit intelligence and to coordinate internationally with other governments and law enforcement agencies.  The government should do more to give the private sector the benefit of these advantages.

For example, the government should devote more resources to collecting intelligence about potential cyber-attacks against private entities, particularly from nation-state actors, and then take steps to help prevent them — not merely notify companies believed to be at risk and then leave them alone, with imperfect and incomplete information, to investigate and respond.   As the Department of Homeland Security takes on greater responsibilities for identifying and minimizing cybersecurity risks to the U.S. economy it should issue pragmatic, cost-effective operational guidance to companies on how to defend against evolving risks.

We also need to focus more on incentivizing security improvements at points in the cyber ecosystem that can have a scale effect and protect large groups of users and companies, rather than leaving each one on its own.  We are collectively better off the more that software providers can use secure coding practices and thereby prevent a vulnerability – rather than requiring every user to install a patch somewhere down the line.  We will also be better served if more Internet service providers mitigate the effects of a botnet by filtering traffic to limit IP-spoofing – rather than requiring every target to fend off a denial of service attack.

Legal and policy reforms are likely needed to achieve these goals and encourage companies to collaborate with the government on these initiatives.  Such collaboration is unlikely unless the law provides greater confidentiality and liability protections than those presently available for companies that take actions to aid our collective cyber defense.  But with the right protections, companies may be more willing to join forces with the government in this way and others to reduce cyber risk.

While we are not challenging that it makes sense to impose some cybersecurity obligations on individual companies, those obligations should be reasonable and clear. Companies that meet a defined set of risk-based requirements, which could be developed through a collaborative, multi-stakeholder process, should have a safe harbor from liability – recognizing that they are victims, not perpetrators, of malicious cyber activity.
Make More Sales With More Ecommerce Payment Options

It may seem apparent that modern consumers are all about paying with their credit cards. But according to a Bizrate Insights study and contrary to popular belief, additional ecommerce payment solutions such as PayPal are disrupting the industry landscape and are used almost as often as plastic money. PayPal's own research reveals that 32 percent of millennials use its services, and 25 percent of them prefer to use it over other options for sending and receiving money. Furthermore, 67 percent of millennials and 56 percent of Gen X spenders prefer to buy on ecommerce sites rather than in stores.

These data points demonstrate a need for multiple ecommerce payment methods. For ecommerce companies, customer convenience must be a priority, and how you handle and process payments affects not only your customer's experience, but your business's overall success.









































































Your customers have unique payment needs.

There are different aspects to consider when choosing an ecommerce payment system for your website. Among the most important are your customers' ages, the countries they live in, and your security and fraud prevention efforts.


Providing your customers with a great shopping experience depends partly on their age. If your target audience is in the older, high-income bracket, for example, they are a lot more acquainted with using their American Express credit card. Including it as a payment option may help your senior shoppers feel more comfortable buying from you. On the other hand, if your audience is younger, PayPal will help increase purchases and customer satisfaction.


Research which type of payment is the most popular in the country where you sell your products. Pulling out the plastic, so to speak, varies significantly from one country to another. It may be the most popular ecommerce payment option in the U.S., Canada, Brazil and China, but credit cards are used less often in Japan, Germany, Russia and the U.K.

Security and fraud prevention

People are not going to hand over sensitive financial information to a website they're not sure they can trust. That's why you need a gateway that's trustworthy and legitimate to provide a safe checkout experience. For additional security, some ecommerce payment options offer data encryption, which helps you meet certain online security standards.

Give your customers the payment options they need.

When it comes to ecommerce payment methods, the more, the merrier. After all, consumers are likely to abandon their carts if their preferred payment method isn't available. By equipping your site with a payment gateway that includes an array of payment methods, you give your business more opportunities to gain sales.  

Debit and credit cards

Paying with a debit or credit card is a standard option, and for the majority of online shoppers, it is an expected ecommerce payment option. Visa holds the biggest market share across the globe, followed by MasterCard, American Express and then Discover.

Online payment gateways

Payment gateways are a service that acts as a sort of liaison to process information at checkout and authorize payments made to e-businesses. Their major advantage is securing sensitive data, such as credit card numbers, and streamlining the processing of information on your end, which helps eliminate manual input.

Amazon Payments is an API-driven gateway, allowing for complete integration into your site's interface; it's just like adding a plugin. Transactions are finalized on your site, and it's available across multiple devices. PayPal is a veteran in ecommerce and one of the most commonly accepted online payment methods in North America. It offers fraud protection, 24-hour support and cart flexibility. It's compatible with all major ecommerce platforms. PayPal does not have monthly charges, nor does it have setup expenses or gateway fees. 2Checkout offers deeply customizable onsite checkouts and a seamless shopping experience. Its key features are a demo of a checkout, support for different languages, and a sandbox feature that links you to the marketplaces. Cash on delivery

In the U.S., cash on delivery (COD) is a payment processing service that's rarely used; however, COD rules supreme in Eastern Europe and India, as well as in many other places in the world. To enable its use, you have to use a courier service that takes cash and will issue you a check showing the value of the goods you ship. FedEx is the best bet because it accepts cash, unlike other couriers that only take checks and money orders.

Alternative methods

We live a technology-driven world. To better serve your customers, you have to keep up with their technological demands.

Bitcoin made a lot of waves in 2018. While there is still uncertainty about its long-term price stability, it is inarguably one of the cheapest and fastest ways to transfer payments around the globe. Implementing Bitcoin on your ecommerce website can potentially attract a highly educated, tech-savvy customer base. A platform like BitPay can help you to integrate payments with Bitcoin.

The Intuit Payment Network is a bank-to-bank electronic funds transfer solution that also allows you to create an ecommerce button on your website. For businesses that have intensive invoicing and accounting activity, Intuit features simple integration with QuickBooks. It transfers money directly to the business's bank account.

Ecommerce financing, also known as "buy now and pay later," is gaining more traction. It can increase online sales and order sizes because ecommerce financing gives customers the opportunity to shop now and pay later. Online stores can use this method for promotions and sales events, and may be able to sell more inventory thanks to easy financing terms. Ecommerce payment options help businesses make more sales.

Regardless of what kind of ecommerce payment solution you decide to use, it's critical to offer multiple methods that reflect your customers' demands. If you decide to sell to an international market, you need to research the top payment methods in your target markets and adapt your site to accommodate them.

After all, completing a payment should be the easiest part of your customer's journey. Try to make it as fast and straightforward as possible for them.

How Can Millennial-Led Businesses Succeed in 2019?

Millennials, it’s time to show us what you’ve got with your small businesses. This year, Chase for Business released a Spotlight on Millennial Business Leaders (MBLs), the millennial edition of their Small Business Leaders Outlook survey. This edition explores the world of small businesses powered by millennials, and the findings have been fascinating.

Once regarded as a novelty to hire in the workplace, millennials have now entered the 30-something bracket of their lives. As small business owners, they stand out because they’re tech-savvy, have high growth expectations (which their tech-savviness contributes toward) and are very optimistic. With small business optimism at record-breaking levels in 2018, you do have to wonder how much of that sentiment came from millennial entrepreneurs.

As the new year approaches, so does another year in business for millennials and their companies. It’s shaping up, in the words of Frank Sinatra, to be a very good year. However, it can be even better if millennials prep their small businesses for long-term success. Using the findings from this survey, here’s what millennials can take care of now to ensure their companies continue trending upward.

Partner or collaborate with like-minded businesses

According to the Spotlight on Millennial Business Leaders, 82 percent of millennial-led businesses expect to see an increase in their profits. This, ideally, would happen over the course of the next 12 months.

There are a variety of ways millennials can strategize this approach, from upping the price tags on their products to expanding their existing offerings. Another beneficial strategy is to consider collaborating or partnering with a like-minded business. These two approaches differ slightly from one another.

A collaboration may be a one-time only situation, or occur as needed. Take a small, successful business that specializes in high-end stationery. The business may need a bit of a sales boost. The organization notices a well-known lifestyle social media influencer, who also loves stationery and fits the business's overall brand aesthetic, follows them on Instagram. The small business may follow the influencer back, begin sending messages to the influencer to establish a rapport and attempt to collaborate on upcoming initiatives for an agreed-upon price. The influencer creates content that puts their own signature spin on the company’s products. This content promotes the influencer's social handles while tagging the company at the same time. This increases the amount of eyeballs viewing, and learning about, your business. As a result, the stationery business gains more awareness, traction, site traffic and potentially sales from its target audience.

A partnership is structured a little differently because it can be long-lasting. Listen to your customers to find out what they need. What does your business not offer that another like-minded organization does? Identify a business that offers what you need, and review its offerings to see if yours would be a fit. Reach out to see if the business would be interested in forming a mutually beneficial partnership that works for each business and benefits both sets of customers.

Get active on LinkedIn

Millennials, not surprisingly, enjoy being active on social media platforms. The survey revealed that 65 percent of millennial-led businesses find that social has had a positive impact on their business. 

There’s a number of approaches MBLs can take in 2019 to keep their social media accounts thriving. My personal recommendation, and one I find works quite well for myself, is to reengage on LinkedIn. Don’t use the site to simply aggregate contacts. Share updates about your business. Comment on the posts your contacts share. Congratulate connections that take on new jobs or positions. And, whenever you’re able, write and publish articles. Share the stories of your successes, thoughts on trends within your industry or further explore topics you’re interested in. Being active on LinkedIn allows you to establish a stronger footprint within your industry and helps professionals that use it sporadically notice you as a business leader.

Find more opportunities to give back

Fifty-five percent of millennial-led businesses will prioritize a vendor that gives back to the community over one that does not. It’s not uncommon to see consumers today seeking out businesses that are transparent or authentic with their practices and beliefs. Consumers want to support businesses that share their values. The same can be said for businesses that want to work with vendors operating with similar values.

Most millennial-led business owners are well past the stage of creating mission statements. They’ve talked the talk. Now, it’s time to walk the walk. Being in business is about more than revenue and sales growth, especially for small business owners.

Make 2019 the year that your business gets involved with its community. Find ways to give back as a team. Support charities, volunteer at soup kitchens during the holidays, clean up highways or work with Habitat For Humanity. Teamwork, after all, does make the dream work.


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