By Claudia Fan Munce, Venture Capital Group, IBM
Great technology development is always seemingly swift and dramatic—but the velocity at which we’re seeing innovation emerge today is previously unheard of, and effectively disrupting just about every industry you can imagine. Entrepreneurs and startups are consistently challenged to develop the next-generation tools that advance existing products and solutions while answering increasingly urgent market demands.
This rapid change in the speed of adoption maps directly to the dramatic decrease in the lifespan of ‘trends’ in the technology industry, with the hot buzz words from one or two years ago already considered mainstream. ‘Social’ is no longer a new trend. All organizations—from startups to the largest enterprise—are finding new opportunities to leverage social elements to create new touch points with its customers and grow its business positions. The same goes for ‘mobile’, ‘big data’ and ‘the cloud’. These are no longer considered differentiators but are now key leverage points upon which to deliver sustainable customer value.
Given all of this, is seems startups are at a fantastic inflection point. Trends like social, cloud, big data and mobile have become the ‘new normal’, and rapid innovation beyond those features is not just a suggestion, but a requirement for success. How, then, can early-stage startups ensure they are staying ahead of the next wave of innovation? They must focus on adaptability, context and personalization.
To accurately quote Darwin, survival goes not to the strongest of the species but to those most adaptable to change. It is incredibly vital for emerging companies to be adaptable. The technology landscape is changing dramatically from month-to-month, where only a few years ago we were measuring innovation in years. If a new company can’t keep up with the constantly-changing needs of end-users and the strategies of the enterprises who serve them, it will fall behind before it’s even off the ground.
A startup’s ability to keep an eye on trends, in order to adapt alongside new innovations, is key to its success. A trend popping up as an extension of the conversation around ‘social’ is the convergence of social, mobile/location-based, as well as analytics. Each of these is not standing on its own, but they are integrated as part of a new solution ‘stack’ that is the confluence of all of these trends allowing companies to present unique services based on an individual’s preference and offering a personalized experience for end-users.
This convergence is quickly becoming a key part of our everyday lives—the way we communicate, the way we research, the way we travel, the way we purchase goods, and so on. For example, a consumer may receive a push notification based on their social settings offering a deal or coupon for services on their mobile devices when near a grocery store. This in turn influences a consumer’s decision to purchase goods from the grocery store that proactively offered a coupon, as opposed to the store down the road they originally planned to go to. As adaption is underway, it’s important for startups to consider not only the immediate need they are looking to address, but also how well they can meet ongoing changes and demands for new functionality.
Context and Personalization
The ability to effectively target consumers with coupons through mobile devices begins with the significant amount of consumer data that companies are mining. Social commerce is a relatively new approach companies are taking to better understand their consumers’ purchasing wants and needs and dramatically lower the costs associated with acquiring these customers. Facebook, Twitter and other social platforms have become living databases, allowing companies to access information on consumers and through these social networks enable brands to harness the power of word of mouth recommendations. Up until recently, companies were taking social data containing specific information about individual buyers and stripping it down to lump consumers together in non-specific categories. For example, moms go to the grocery store or teenagers buy movies. Now, companies are working to put context and personalization back into the messages directed at consumers, creating a trend called ‘context mining’, in order to create the personalized experience beyond simple consumer categorization.
Context mining is being used more frequently as the end-user now has to be top-of-mind for B2B companies, demanding a shift in how solutions work. This idea directly affects the role of a company’s CMO, who is ultimately leading marketing, sales, and product development efforts within a company. We’re seeing VCs funneling funding into companies that have the CMO in mind, which means the B2B2C trend—B2B companies building products to sell to B2C companies to assist with personalization—will only continue to expand.
Contextual mining also brings up the issue of protecting and ensuring end-user privacy, specifically as the inclusion of social features offers the ability to access personal information for each individual user. Today’s opt-in privacy settings option is a result of this growing trend. This type of personalization will be supported by consumers as long as companies are providing full visibility into privacy features, allowing them to opt in (or out) of a company’s use of private information. This approach will continue as long as the value of pushing offers to consumers is worth the return in the end. Ultimately, powerful new analytics that can identify and model patterns of customer behavior will aim to optimize these offers based on more and more precise context and therefore better predict this consumer behavior.
Bringing It All Together
While we’ve become used to seeing individual trends emerge at a rapid pace, this convergence of multiple trends at this rate, along with the focus on a ‘market of one’, is a new challenge emerging companies will have to learn to navigate in order to keep up with the ‘new normal’ in today’s rapidly innovative world. Earlier this year, the Global Entrepreneurship Monitor found that 12.3 percent of the U.S. population was actively engaged in starting or running a new business in 2011, a 60 percent increase from 2010. These numbers are only expected to increase in the coming years, lending to an already competitive startup environment. It is vital for early-stage startups to adapt to the rapidly evolving trends in order to accelerate ahead of the competition, establish strategic partnerships, gain recognition in the market place, work with valuable VC partners, and ultimately grow their business.
# # #
Claudia Fan Munce has been Managing Director of the IBM Venture Capital Group since 2004. In addition to this role, she is vice president of IBM Corporate Strategy. Ms. Munce joined IBM’s Research Division in 1985 and has held many technical and business leadership positions. She is on the Board of Directors of the National Venture Capital Association and has previously served as the chairwoman for the Corporate Venture Advisory Board as well as a board member for the Latin American Venture Capital Association. Ms. Munce also serves on the advisory board of several venture capital organizations worldwide.
IBM’s Venture Capital Group seeks to build strategic relationships with venture capital firms and their portfolio companies, focusing on growth markets and emerging technologies. Venture Capital Group’s mission is to promote an innovation ecosystem engaging the full range of IBM resources and capabilities with that of its venture capital partners and other key innovation drivers to maximize growth opportunities.
Munce holds a master’s of science in Electrical Engineering and Computer Science from Santa Clara University and a master’s of Business Administration from Stanford University.