Future of App Monetization in Digital Age

App Monetization

App monetization has created fortune for many gaining momentum over last decade and profoundly in last five years. News like “$240 million in customer purchases makes January 1, 2017 the App Store’s busiest day ever” is hitting the headlines. Apps revenues are more than doubled compared to 2014 levels, clocking $58 Billion in 2016 and estimated to reach $78B+ in 2017. In the backdrop of significant market opportunity, I would like to offer deeper insights on App marketplace, monetization business model and key trends evolving in this space.

App Market Insights

First let us look into the current App market landscape and key analytics with a deep dive into this opportunity space as presented in the info-graphic above.

App Monetization and Business Models

App developers can monetize their Apps in many ways. For example, Play Store and the App Store offer the same revenue-sharing terms to developers, ~70% of the amount paid by users goes to developers. Choosing a context specific business model plays a critical role in sustenance and growth. The following are key business models and their characteristics.

Business Model Key Characteristics
Free Model
  • Zero Price.
  • Increase User Base.
  • Generate Revenues with Ads.
Freemium Model
  • Zero Base Price.
  • Optional In-App Purchases (premium features, additional content, subscriptions, or digital goods etc.)
Paid Model
  •  Pay to Download App / But App Bundles for Discounts
  •  One Point of Monetization at the time of initial buy
  •  Outstanding design, functionality, and marketing
Paymium Model
  •  Combination of Paid & Freemium Models (Can Combine in App Bundles)
  • Pay to Download & Options to Buy Additional Features
Subscription Model
  •  Buy In-App Purchases (to access content, services, and experiences)
  •  Auto-Renewable or Now-Renewable (User Driven)
  •  Subscriptions can be offered in Freemium / Paymium models

App Trends

The following trends will continue to evolve in App development in perfect alignment with digital age.

  • Apps are becoming Artificially Intelligent
  • Embedded AR / VR technologies in Apps
  • Faster web page loading on mobile devices with Accelerated Mobile Pages (AMP)
  • Cloud enablement of Apps with an ability of fetching data & analytics from cloud
  • Business processes and workflows are getting on Apps with the help of Micro services and componentization
  • In digital driven economy, m-commerce is becoming a new standard
  • Internet of Things is exploding Apps socialization
  • Location based services are gaining more traction
  • App security is becoming paramount

There is a promising future for value adding Apps. The current and future start up communities have to focus on developing high quality and contextual rich Apps and building tailored business models to succeed in next evolution of App marketplace. Reach out to me at Kishor.akshinthala@gmail.com for a deeper discussion on App Monetization.

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Digital Revolutions

DR

Markets have been constantly evolving from pre-internet era of viscous state through fluid state over last decade with internet democratized access to information, reducing buyer-seller information asymmetry. Digital Revolutions with the advent of AI, Blockchain, Robotics, AR/VR, and hyper connected driven IoT technologies are forcing companies to functioning in a state of super fluidity in recent times.

Fortune 1000 organizations and VC backed startups are applying AI, ML, AR/VR, Blockchain and IoT to empower enterprises to make intelligent decisions, prioritizing and driving next-gen innovations improving the success rates. As an enthusiast envisioning the success of superfluid markets and with know-how of recent technology developments, I would like to summarize below the driving forces of Digital Revolutions

  • Key characteristics of Digital Revolutions: As businesses are trying to become intelligent enterprises with real times responses, there is an increasing demand for dematerializing their physical assets with digital touchpoints. In these times, business operations, supply chain, supporting infrastructure and technology, and enormous volumes of data becomes software driven making enterprises become hyper connected seamlessly and derive proactive insights. This is leading to Digital Revolutions offering a rich user/consumer experiences.
  • Blockchain and IoT are expediting the pace of Digital Revolutions: We have now entered the age of superfluid markets, which represents the convergence of multiple forces. While many transaction costs were reduced during the fluid market period, costs around contracting, trust and the policing and enforcing of contracts remained high. The maturation of blockchain technology as a transaction engine in which trust is “built in” will reduce even these costs. With the Internet of Things, physical goods are being sensed, tagged and linked to the Internet, with the promise to better match supply and demand. Intelligent agents will soon anticipate buyer preferences before buyers themselves. The intersection of blockchain and IoT will create autonomous markets that run themselves cheaply and efficiently. The gig economy implies increasingly superfluid labor markets. And these developments may just represent the tip of the iceberg. Examples include,
    • Blockchain potentiality to offer intrinsic business value in integrated utilities management with a reliable, low-cost way for recording validating financial or operational transactions across a distributed network with no central point of authority. Peer-to-peer energy trading, Billing of AV charging stations, Power Ledger and Smart grid management systems are few use cases.
    • Visa’s IoT platform designed to bring the point-of-sale everywhere by allowing businesses to introduce secure payment experiences quickly to any device connected to the IoT. Visa’s vision and belief is to securely embed payments and commerce into any device—from a watch to a ring to an appliance or a car.
  • Robotics and Bots are first steps of organization in taking advantages of Digital Revolutions: Robotics are emerging to pick up precision heavy activities and “bots” leveraging AI is taking customer service and experience to the next level. Take a look at inVia that is introducing “robotics-as-a-service” to the new economy with first “goods-to-box” warehouse packing system. This new robotics system that put goods directly into shipping boxes. Instead of investing in a fleet of robots, customers pay a monthly service fee.
  • Artificial Intelligence and Machine Learning are big boost to Digital Revolutions: AI combine with machine learning is paving ways to new business models. AI technologies already pervade human lives progressing beyond simply building systems that are intelligent to building intelligent systems that are human-aware and trustworthy.
  • AR/VR is becoming a driving force of Digital Revolutions. Let us take examples of retail industry transformation. Virtual reality (VR), along with its sister technology augmented reality (AR), offers retailers the opportunity to transform how people shop. One customer might try on shirts without having to travel to the store. Another might order furniture on the spot, confident that it’s right for the house. Applications using either technology stand to eliminate customer pain points, elevate customer service, and create a differentiated, personalized customer experience. The successful incorporation of VR and AR into retail models also has the potential to vastly change the way retailers are thinking about stores of the future

Digital Revolutions are leading to superfluid markets which will continue to evolve differently across different industries and companies. These transformations are what we continue to explore into future. There is a pressing need for companies to collaborate exchanging ideas, trend spotting, and tap innovations to succeed in  future frictionless markets.

Predictive Maintenance Value for Process Industries

PM

Process industries are undergoing digital transformation building and integrating Minimum Viable Products (MVPs) in their strategic path to enabling business models, services, customer experience, operations, and workplaces re-imagination. What I notice across process industry segment is application of industrial internet concepts in creating predictive maintenance models that are yielding advantages including – greater machine availability, superior process quality, easier to plan service intervals, longer machine service life, safer and more sustainable operation, lower service efforts and decreased costs. I am highlighting few aspects demonstrating thought leadership in this space.

  • Companies are sponsoring proof of concepts and pilots for creating models to monetize predictive maintenance. As Predictive Maintenance and Condition Based Monitoring directly impact equipment uptime, by offering Predictive Maintenance as a service, the manufacturer can guarantee equipment uptime to their customers for a fees, i.e. selling value-added services which promise recurring revenue.
  • Process manufacturing is leveraging integrated utilities to reducing electricity consumption with just-in-time energy management with a dynamic platform delivering energy performance improvement with ‘as-a-service’ through edge connectivity of various assets, data acquisition and gateway, cloud-based technology, and analytics. Also include tracking people movement and asset utilization.
  • SRP performance monitoring center using Industrial Internet is another classic example. Since starting the GE Digital’s SmartSignal program in 2012 and through to 2016, SRP identified more than 1,900 issues, of which 800 were “catches” – a problem that the plant was not previously aware of and, with the new alerts, was able to take corrective action. With time and improved training of the algorithms, the rate at which the company identifies true issues and catches has improved.
  • One use case of specific interest to Food and Pharma industry’s glass packaging quality control and improvement is Wi-NEXT IIoT that drives major changes in glass container quality improvement reducing non-conforming products by 7%, which equals 5% extra line productivity, better process control, and higher customer satisfaction
  • Lastly sustainable business models of predictive maintenance includes – bundling within basic service agreement framework, a freemium offering during warranty with downstream revenue potential, offer value added service with pay-per-use model, and gain-sharing with partner ecosystem.

Process manufacturing winners are those who identify best in class practices for developing business models for predictive maintenance of equipment. Win-win scenarios for manufacturers arise from enabling collaboration of experts in this space to exchange ideas, spot trends and drive innovations.

New IT enabling Superfluid Markets

Super Fluid

 

 

Digital forces like AI, Machine Learning, IoT, Robotics, VR/AR, Blockchain etc. are reimagining business models transforming goods, services and labor markets at unprecedented pace enabling the superfluidity of the markets. Two fundamental characteristics of superfluid markets are shrinking lead times making the interactions seamless and near realtime, and second is extreme focus on cost-to-value ratio. I will discuss the evolving nature of markets with few use cases below.

1) Goods and Services in Superfluid Markets:

i) Artificial Intelligence and Machine Learning: AI combine with machine learning is paving ways to new business models for example, changing the landscape of online ads by connecting shoppers to goods using images. Take a look at an AI platform called The Discover Machine, created by the startup Z Advanced Computing (ZAC). This new machine learning backed platform is changing the landscape of online ads. ZAC claims to offer something unique by producing online ads generated through images, not text. The machine-learning platform can be applied to searches from shoppers that will lead to the product on a merchant’s website, or to serve merchants by generating targeted visual ads based on a customer’s browsing history. The intended users of the platform include shoppers, merchants, and bloggers or other publishers.

ii) Internet of Things (IoT): As the Internet of Things (IoT) continues to grow and drive a more connected world, it is changing the way we live, shop and pay by moving data and the point-of-sale to wherever the consumer wants it to be. Take a peek at Visa’s IoT platform designed to bring the point-of-sale everywhere by allowing businesses to introduce secure payment experiences quickly to any device connected to the IoT. Visa’s vision and belief is to securely embed payments and commerce into any device—from a watch to a ring to an appliance or a car. Experts estimate there will be 380 million connected cars by 2021. Visa is working with a number of car manufacturers (and other companies from across the car ecosystem) to build and test prototypes for car-based payments. By connecting the car ecosystem to the Watson IoT Platform and enabling the car with secure payment functionality, imagining the many possibilities becomes easy. Drivers could be alerted when their smog certification is about to expire or if a specific car part needs replacing, responding by either scheduling a service appointment or ordering the part that has the combined lowest cost and fastest shipping time. The range of other options is virtually limitless, extending to insurance offerings, paying for gas without a physical card or zipping through the drive-thru that much faster because the payment part of the transaction no longer exists.

iii) Robotics are emerging to pick up precision heavy activities and “bots” leveraging AI is taking customer service and experience to the next level. Take a look at inVia that is introducing “robotics-as-a-service” to the new economy with first “goods-to-box” warehouse packing system. This new robotics system that put goods directly into shipping boxes. Instead of investing in a fleet of robots, customers pay a monthly service fee.

iv) AR/VR in a classic example driving superfluidity is transforming the retail industry. Virtual reality (VR), along with its sister technology augmented reality (AR), offers retailers the opportunity to transform how people shop. One customer might try on shirts without having to travel to the store. Another might order furniture on the spot, confident that it’s right for the house. Applications using either technology stand to eliminate customer pain points, elevate customer service, and create a differentiated, personalized customer experience. The successful incorporation of VR and AR into retail models also has the potential to vastly change the way retailers are thinking about stores of the future

2) Labor Markets:
“On-demand and online talent platform” is a new labor model in the connected digital age. As per multiple surveys 1B+ people are unemployed in Developed & BRIC nations. According to McKinsey, online talent platforms serve as clearinghouses that can inject new momentum into job markets. By 2025, they could add $2.7 trillion, or 2.0 percent, to global GDP and increase employment by 72 million full-time-equivalent positions. Global companies are rethinking their talent strategies to tap Connected Transparent Talent Pool.

Part II: Direct-To-Consumer Business Model Innovation and Emerging Trends

D2C

“The Best Service Is No Service” – Picked from authors Bill Price and David Jaffe, the best way to satisfy customers is eliminate the need for service altogether. The need of the day for DTC seller is to progress beyond offering personalized service to true customer excellency with “No Need for Service”.

In continuation of last series, elaborating further on business model innovation and evolving trends in direct-to-consumer marketplace that are fueling the growth. The following is summary of few of trends.

“Direct-to-Patient” Model: For example Telehealth, is likely a strong area of interest due to its potential for significant impact on care delivery. While virtual visits may have the ability to shift significant volumes of care and expand access, uncertainty remains for many institutions regarding reimbursement levels, compliance standards and best practices for planning. Very promising D2C model to keep an eye on.

“Drone-enabled” Delivery: D2C can really be fueled by drone-based delivery. The ideal candidates are replenishment products where shoppers essentially repeat-purchase, building online channels makes a lot of sense for a brand, especially in the age of 1-hour drone-enabled delivery. Repeat-purchase models also help the brand get and remain entrenched with shoppers, often opting for convenience and loyalty over price

Brand experience via “Commerce-as-as-Service”: Consumers are demanding a enriched experience. Direct-to-consumer business model combined with a distinctive, compelling and focused public-facing brand experience, lets manufacturers control and cultivate relationships with customers that transcend retail channels.

Instagram Buttons: PepsiCo is one of the classic use case of leveraging Instagram Buttons for its D2C strategy. PepsiCo succeeded selling its IZZE – a range of carbonated drinks – aimed to sell online effectively to ‘hipster millennials’ by following e-commerce trends in Instagram buttons, links to Amazon and early adoption of Amazon Dash buttons

Hybridization: The hybridization of brick-and-mortar, e-commerce and pop-up retail is creating interesting new business practices. Chacos footwear is a classic example – owns its website and sells direct-to-consumer supplemented by a series of nomadic pop-up shops in cities, at music festivals.

Uberization of Payments: Uber and Airbnb have been at the forefront of integrated commerce, a trend that many in the payments industry refer to as the ‘Uberization of payments’. In this space, mobile is key to DTC opportunities because it reduces the number of steps between browsing and buying. In the case of Uber, the mobile app turns many would-be cash or card transactions into automatic digital payments. Apps such as these have introduced many first-time mobile payment users to the concept of mobile-enabled commerce. We know how quickly this industry is evolved.

Facebook AR Model: Facebook thinks the future of smartphones lies in AR and AR enables advertising and social hellscape. Ubiquitous and free-to-use AR built right into smartphones is fast approaching. That paves the way for aggressive advertising overlaid over every inch of our line of sight, and the kinds of public ranking systems that split society into the have’s and have not’s.

Amazon Algorithm: The core of D2C strategy here is an all-out price war between Amazon and Walmart. I would like to mention about “Amazon algorithm“ – as media reports say Amazon algorithm that works to match or beat prices from other websites and stores. It finds the lowest price per unit or per ounce for a given product — even if it’s in a huge bulk-size pack at Costco — and applies it across the same type of good on Amazon, even when the pack size is much smaller.

IKEA “Co-creation Platforms”: IKEA achieved double digit growth for digital sales with a user-generated platform engaging buyers from the design stage to purchase. This platform became a gateway for social commerce showcasing the homes of IKEA’s online community and transforming them into real life product showrooms.

Google’s Zero Moment of Truth: Unlike the earlier days of mass media advertising, zero movement of truth in DTC arena is often more peer- and social media-driven. Marketing channel that arguably is poised better than any other to both create that moment of truth. The customer becomes a co-creator in the creative process and consumers are evolving into prosumers.

Let us meet in Part III of the Series ….

Direct-To-Consumer (DTC) Strategies fuelling Retail Growth – Part I

DTC

Direct-To-Consumer companies  through new retail channels are driving two fundamental changes in the business models fueling next-level growth. 1) Offer shoppers ways to cut out physical store visits avoiding traffic, 2) Enable bypassing middle-man distributors. Innovation in DTC e-commerce and Omni-channel strategies is playing a key role in retail business sustenance and growth. DTCs primarily focus on designing and selling apparel, accessories, and many more directly to consumers through their own online channels. DTCs offer a superior shopping experience, higher-quality goods, cheaper products or greater convenience overcoming the constraints of incumbents monopolistic companies. Let us examine how DTCs enabling next-level growth with few use cases below.

1) Legacy companies usually sit on large profit pool and accustomed to doing business one way being constrained to pivot and think outside the box. Take a closer look at Warby Parker from its emergence in 2010 as it redesigned customer experience featuring home try-on and dramatically reduced price points as compared to dominant industry players. Warby Parker succeeded in establishing a business model to directly reach consumers.

2) Razor market is another classic example. As Gillette having cornered the retail market and established high price points, a DTC subscription model got emerged with upstarts like Dollar Shave Club and Harry’s which succeeded in bypassing the retail channel completely, which enable them to offer hugely discounted prices. And despite Gillette trying to play catch-up with its own DTC offering, its prices are still higher as compared to new crowd favorites.

3) Dental hygiene is a tough market, with just a few familiar consumer brands from which to choose. Goby has circumvented traditional distribution channels by aligning itself with dentists who have come to recommend the product. Goby is aiming to change that paradigm, offering the first subscription-based DTC rechargeable electric toothbrush that’s simpler and half the price of retail brands

4) Fresh start of DTCs enables them with innovative B2C marketing strategies. While Huggies and Pampers have been the diaper mainstay for generations, for example, Honest has been giving them a run for their money, thanks largely to its superstar spokeswoman and brilliant marketing tactics.

5) Take a look at Wine industry. Vying for customer attention with digital-first brands in a highly fragmented industry where brand loyalty is notoriously low. Penrose Hill, which is reinventing the wine club experience through homegrown wine brands offer improved value, selection and convenient delivery formats direct to consumers.

One key take away is DTC companies are less shackled by the legacy technologies, risk-averse cultures that large companies so often are, but on the other hand established players will need to do far more to emulate their DTC counterparts if they want to tap into high-growth market opportunities.  The next post in this series focus on DTC business model innovations.

Changing anatomy of large outsourcing deals

Outsourcing.jpg

Is the number and size of large outsourcing deals getting shrunk? Answer seems to be Yes. For the mega deals happening in the market, there are some business takeover activity – where suppliers have to make significant upfront payments. It typically involves writing a check to create joint fund, buying an asset or taking over delivery centers with a large ticket long term deal commitment. This requires a revised mindset of suppliers and such changing behaviors include,

  • Put skin in the game to partner in large smart sourcing transaction rather than just winning a hefty TCV contract
  • Collaborate with clients to expediting cloud adoption – end of life asset strategies and strike a balance with apt markups to manage cloud contracts
  • Refresh application / software currency delivering services in hyper connected world
  • Enable efficient business processes with platforms that offer predictive and prescriptive capabilities with consumption based pricing
  • Not really offshoring but the right balance with local-shoring offering cost arbitrage
  • Revived business model with competitive margins. Automation is the next frontier for to improve profit margins
  • Progress beyond automation – a software bot is costing about one-third the price of an offshore full-time employee
  • Keep in mind “Digital is default” – partner to digitally reimagine client’s business and transform into AI’led sourcing.

Digital IT Imperative – Six Driving Forces

Digital Imperative.png

The impact of Digital is intensifying across the world characterized by brands defined by customer experience and winners being determined not by scale but by innovation and agility. Information Technology plays a significant in Digital Re-imagination. In this post I will discussing the SIX FORCES of Digital IT imperative. These forces are not in any specific order but cloud, automation and continuous delivery is paving way to hyper-connected world enabling Omni-channel customer experience and there by evolving new IT operating model.

  1. Journey to the Cloud: Businesses now relies on IT based services as the foundation for new products and services and as the primary way to focus on customer value. It is also inherent that for meeting growth and profitability objectives, businesses requires higher levels of performance and agility from IT. Hence cloud adoption is becoming increasingly important for enabling organizations to make efficient and secure use of a pool of IT resources that can expand and contract based on the business needs in Digital journey.
  2. Continuous Delivery: Continuous Delivery is the ability to get changes of all types – including new features, configuration changes, bug fixes and experiments – into production, or into the hands of users, safely and quickly in a sustainable way.
  3. Business Process Automation: In Digital Age human labor is transitioning into digital labor. Business time-to-market is driven from minimizing human touch and ingraining automation across value chain. Robotics Process Automation and Cognitive Technologies are driving next-wave of business process automation.
  4. Internet of Services: The ultimate objective of Internet of Things (IoT) is pave path to Internet of Services (IoS). Few analysts are projecting that reduced hardware cost, ubiquitous communication and IoT will lead to a service oriented community by 2030.
  5. Omni-Channel Experience: At its core, omni-channel is defined as a multichannel sales approach that provides the customer with an integrated shopping experience. All the forces above combined expedite the Omni-channel customer experience.
  6. New-Age IT Operating Model: Organization have to move away from traditional Plan-Build-Operate model of IT. New and disruptive technologies are impacting people, processes and governance of IT departments. So businesses are evolving new ways of running IT and ensuring the new operating models are meeting the many and varied challenges in digitally connected world.

Operational Excellence in New Age Businesses

operational-excellence

Operations is an integral part of businesses and operational excellence leads to business excellence. It is designed to provide value to customers and stay relevant with customer needs in achieving customer satisfaction. Excelling in operations is an art to ensure the success of new business models being innovated and and deliver substantial stakeholder value quarter on quarter in addition to expanding revenues on ongoing basis. Fundamentally the following are pillars of operational excellence.

  1. Product Design: Businesses have to design and develop products that are industry renowned and recognized by analyst communities to echo the sentiments. Managing delivery of minimum viable products designed is the default expectation. The underlying business finances create and reinforce the strong backbone for success.
  2. Process Optimization: A simple measure of process efficacy is delivery excellence. Right from business alignment to managing right infrastructure to ensure the customer experience is mandatory in digitally reimagined world.
  3. Support Efficiency: Customer focus and result certainty is the norm of business support. End user and customer always pose a healthy challenge and it should be primo motto of businesses across the world to reinforce the customer engagement and avoid customer dissatisfaction. The key to achieving this is building the right talent and demonstrate the workforce results.
  4. Operational Effectiveness: The time tested leadership and governance is the foundational block of operational excellence. Among all the industry renowned practices workforce communication and engagement plays a key role here. Fiscal and regulatory compliance is at most important along with Deming & Japanese quality measures. Corporate social responsibility and ethics is defacto expectation of millennials to name a generation importance.
  5. Art of Innovation: Innovation at least should demonstrate financial viability and sustenance of a business. If a business is not creating a constant value to society its very existence is questioned and rest is the story based on historical anecdotes. Innovation comes from promoting culture of joint investment from partners and create an ecosystem of co-innovation. Remember we are living in a world of crowdsourcing.
  6. Security & Safety: It has maximum relevance in today’s connected world. Security comes from assurance – the level of guarantee that a system will behave as expected, countermeasure – way to stop a threat from triggering a risk event, risk threat avoidance, vulnerability management and exploiting vulnerability that has been triggered by a threat. Safety is important to distinguish between products that meet standards, that are safe, and those that merely feel safe.

I will be discussing further details around tenants of operational excellence in next post.