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$1.7 Trillion Big Business Digital Transformation

Digital transformation is the change related to the application of digital technology in all aspects of human activities. This type of transformation means that digital usages will enable new types of creativity and innovation in a particular domain, instead of simply enhancing and supporting the traditional methods. Digital transformation’s definition can be as simple as going paperless, affecting individual businesses and whole segments of the society, such as government, art, mass communications, science, and medicine.

$1.7 Trillion Business

A new report from the International Data Corporation (IDC) projected that spending on digital transformation by the end of 2019 will reach $1.7 trillion worldwide, a 42% increase from the 2017 spending for the industry. It is a clear sign that companies are moving forward to digital as shown by their increased spending, although a large percentage of companies are still at the early stage of maturity. This is a confirmation of a similar study conducted by Harvard Business Review and Microsoft, as elaborated below.

Businesses, in particular, will approach digital transformation for its inherent benefits and in order to be competitive with the new breed of digitally native competitors – companies formed in the digital age with main focus on digital technologies.

IDC’s predictions represent the current thinking on the need for businesses to digitally transform in order to be competitive and to embrace the digital economy. But while many companies, especially the big ones, are inching towards digital capability, there are still those that will not be able to transition to the status of a digitally native organization.

The IDC report included a prediction that by the end of 2018, 40% of business organizations will have fully digital leadership team. By 2019, digitally transformed businesses will generate almost half of their revenue from future commerce business models, while 40% of digital transformation efforts will utilize artificial intelligence (AI) or cognitive capabilities. Analysts estimate that by 2020, 60% of businesses will have an organization-wide digital platform strategy.

Graphic of investment in digital transformation

Digitalization

A study conducted by Harvard Business Review and Microsoft showed that 75% of business leaders envisioned their companies to accomplish digital transformation within the next three years, although many of them do not have yet a full strategy for the transformation.

The concept of digital transformation is like digitalization, or even a next step in optimized workflow automation. The pace that most companies approach digital transformation has been slow even if large companies have been claiming that they have started the journey to digital transformation.

The society as a whole is moving towards digitalization with the investments pouring on the development of the Internet of Things (IoT), together with innovations in the fields of robotics, connectivity, AI, digital biology, bioengineering, and more. It is undeniable that the fourth industrial revolution is upon us. It is a fusion of the technologies that blur the lines between physical, digital, and biological systems. The new industrial revolution promises to drastically alter the way people live, work, and relate to one another.

The fourth industrial revolution will be a disruptive force on how people, and especially business organizations, approach digital transformation. Businesses, in particular, will approach digital transformation for its inherent benefits and in order to be competitive with the new breed of digitally native competitors – companies formed in the digital age with main focus on digital technologies. It is a fact that digitally native companies are outperforming the traditional companies which have a slow approach to the digital playground. Digitally native companies, such as Amazon, eBay, and Netflix, have streamlined their operational processes and provided improved customer experiences.

Stripe Battles the Giants

There are giants in the land—with names like Google and PayPal. The Collison brothers have the bold idea to slay those giants (or at least whittle them down to size). Surprisingly, some of the giants are cheering them on.

To beat the competition, the Collisons plan to add value to the 2.9 percent fee by bundling new tools into the core product. Included among Stripe services are the ability to support Apple Pay, sell products directly from tweets, and accept 135+ currencies.

In 2010, brothers John and Patrick Collison co-founded Stripe to solve a problem they encountered when trying to sell their apps for internet and mobile phone—the complexity of the existing payment processes. In an interview with Fast Company, Patrick put it this way, “Google Checkout and PayPal are these confusing things, and we wondered why they hadn’t solved these issues. What’s wrong with them?”

Recognizing that payment technology hadn’t kept up with the ever-increasing demand for online transactions, Moritz and Paypal co-founders Peter Thiel and Elon Musk, rather than battling the upstarts, jumped in to invest in the company.

Since founding Stripe, the brothers have developed a more ambitious vision—to unseat Paypal to become the go-to vehicle for online payments.

Some people might think the Collison brothers are delusional, but one look at their background should change their minds.

John and his brother Patrick were born in Limerick Ireland to parents with scientific backgrounds. Their father Denis was an electrical engineer and their mother Lily s a microbiologist. While the boys were still young, the parents left their technical backgrounds behind to explore the business world. Denis ran a lakeside 24-bedroom hotel, and Lily launched a corporate training company.

This combination of science and entrepreneurialism wasn’t lost on the brothers, who began computer coding in the 1990s. Keep in mind, Patrick was born in 1988 and John was born in 1990. As computers and coding advanced so did the Collison brothers’ skills and business interests.  While still in their teens in 2007, the brothers started Auctomatic, a software company that created a way to manage eBay auctions. The company sold for $5 million in 2008.

 

Stripe made its official debut in 2011 with John as president and Patrick as chief executive officer.  The service became immediately popular with startup companies. All a merchant had to do was add seven lines of code to its site to manage payments. Setting up an account took a matter of minutes as compared to weeks with the competing giants.

Today, Stripe serves as the financial engine for more than 100,000 businesses, most small, but a handful of its best-known clients have grown with the company. Lyft, Shopify, Kickstarter, Postmates,  Wish, and Twitter process tens of billions in payments combined through Stripe.  It’s possible that within the past year, as many as half of America’s shoppers have purchased something online through Stripe’s services. This volume of business has resulted in a $9.2 billion valuation, making  Patrick and John two of the world’s youngest billionaires.

The online payment industry is fiercely competitive. Not only does Stripe have to contend with giants such as Google, Apple, PayPal, and the Dutch company Adyen B.V, but other startups and big banks are out there grasping for a share of the market.

To beat the competition, the Collisons plan to add value to the 2.9 percent fee by bundling new tools into the core product. Included among Stripe services are the ability to support Apple Pay, sell products directly from tweets, and accept 135+ currencies. Stripe has also added a fraud-detection feature.

Stripe’s success at making digital payments simple and easy has led to the more ambitious vision, “building the universal payments infrastructure of the internet.”

The Collison brothers may have turned seven lines of code into a $9.2. Billion startup, but to win the battle with the giants and achieve their grander vision, they will have to not only capture startups but garner business from the big players of global commerce. Stripe’s new partnership with Amazon. com Inc. brings the brothers a giant step closer to their bold vision.

 

Reinventing Education, AltSchool Shifts Focus

AltSchool is a micro-school system with the goal of technical reinvention. It established four schools which are totally different from the traditional school system. It aimed to develop bold ideas and technology for use by other schools for their own curriculum.

The idea was to create a school, and discover insights within the school that will lead to new techniques, as well as development of new software and apps.

Traditionally, the education system has proved that it is resistant to change. There are only a few things which have changed in the school system in the last 30 to 50 years. AltSchool is a laboratory for new tools, methods and theories. The founder, Max Ventilla wanted a school which had “personalized” learning, with the latest technology, and the best teachers. Each child had lessons tailored to their individual needs, strengths and weaknesses.

Developers would use new things that educators learned from the school to turn into technologies to be sold to other schools. The selling point of the venture was not that it was a better school, but the technologies being developed.

AltSchool has raised more than $175 million to reinvent education. Among the venture capitalists which have contributed to the funding are Mark Zuckerberg, Bill Gates, Reed Hastings of Netflix, and Mark Benioff of Salesforce.com.

Founded in 2013, AltSchool built 7 locations in the Bay Area and New York. Today, there only 4 remaining schools open. It has 35 to 120 students per school, with tuition of $20,000 to $30,000 per year. It is also losing money as it spends around $40 million per year. It does not have a lack of investors as it has $60 million still in bank, and can raise funds at any time it needs to. For a startup it has lots of runway.

AltSchool Difference

Statistics on alt school

This is what some parents say in defending the school, that the school does not have to explain itself to the students or the parents, it has to explain to the investors. The idea was to create a school, and discover insights within the school that will lead to new techniques, as well as development of new software and apps. At some point in the near future, these would be sold to other schools, while the school itself continues. The parents understand that their children would be guinea pigs in this educational experiment.

There is much to learn from the school. It provides a high level of independence in learning for each student. There is a high teacher-to-student ratio, allowing for more interaction between students and staff. The students have allotted computer or tablet time, and assigned individual learning plans.

The classes also have closed-circuit TV recording the students’ activities. The results of the activities are also uploaded to the internet for the review of the teachers and sharing with the parents. The children engage in different activities during the day following a Personalized Learning Plan. The activities include research for a project, a separate group project and interdisciplinary work. The school follows the Common Core curriculum, but it does not have traditional grade levels. The students are all between 4 and 14, and are divided into 3 groups or classes corresponding to lower elementary, upper elementary and middles school. AltSchool only teaches up to the equivalent of Grade 8.

Up to 2015, the plans called for opening 5 more schools by 2017, in Manhattan, Chicago and San Francisco. Part of the plan was to sell software to public schools around 2018 to 2020. Shutting down schools affects the students and the parents, but if the company will sell learning software soon, then the investors might turn happy.

Wearable Health Tech Aims at Big Picture

The first health wearables monitored pulse rate, blood pressure and number of steps a person takes. These later evolved to include other features such as memory functions and goal keeping. After the introduction of the initial rollout, there was a rush to make a smartwatch which included the features from health wearables. After the crush of rapid development, things are progressing in a more orderly manner.

Development is a collaborative and iterative process. Prototypes improve with every iteration. Costs have to shrink to affordable levels. Effectiveness, accuracy and relevance are other factors to consider before going to market.

Recently, the U.S. Food and Drug Administration (FDA) introduced a pre-certification program for a limited number of tech companies in the hope of streamlining the process of introducing innovative technologies. Among the companies included in the program were 9 companies such as Apple, Samsung, Fitbit, and Verily Life Sciences (an Alphabet company).

Not all of the companies in the FDA program are into wearables, though. For health wearable developers, it is important to keep themselves on track with some basic questions. Although these questions are fundamental, these are still necessary for the public and the tech company to understand where these ideas are coming from.

Criteria for Development

Why do wearable products exist? What is the goal in developing such products? Apple has stated that they want to develop a wearable which can measure a person’s blood glucose levels. The goal is helping those who have diabetes to better control their diet, and their blood sugar levels. It is important to have a goal, whether this is for the short- or long-term, to motivate the developers, as well as to see the market. Some research can be likened to shots at the moon and would take a long time to develop.

 

Who helped in developing the product? Admittedly, some companies have kept their research and development a secret. Even in such cases, they would still require a fairly large number of potential users, or a collection of big data for any artificial intelligence (AI) or machine learning. In addition, purely tech companies need the help of industry experts. In the same manner, health tech companies require the help of hospitals, health professionals and hardware people for their own development. In addition, health tech cannot go far without the input of potential users.

In this case, a large pool of potential users included in any tests can help the developers to success. Development is a collaborative and iterative process. Prototypes improve with every iteration. Costs have to shrink to affordable levels. Effectiveness, accuracy and relevance are other factors to consider before going to market.

Does it have a target market or patient? Researchers start solving a problem by following a hypothesis. There is a health issue, and it involves people who are suffering, or it is a product which can help in monitoring a life sign. If the initial research is promising, further research follows. With every promising research an idea becomes more concrete. Most startups have their beginnings in these promising academic or hospital-based researches.

At some point, these branch out to products and processes licensed by the university or hospital, or the researchers start their own companies to further develop a product. Either way, the researchers understand that their work has a potential to reach a market. Without a target market, or a patient, the product does not address a problem. It does not have a mass market appeal.

The Road Ahead

Wearables are the next big thing in health tech which has the potential to leave a bold impact in peoples’ lives. With each market success, there would be more companies developing new health tech products. It is vital that these companies keep their eyes on helping the general population stay healthy.