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Top 10 Strategic Predictions for 2015 and

Beyond: Digital Business Is Driving 'Big Change'


04October2014

G00269904

Analyst(s):DarylC.Plummer
(http://www.gartner.com/analyst/7521)|LeslieFiering
(http://www.gartner.com/analyst/330)|KenDulaney
(http://www.gartner.com/analyst/3855)|MikeMcGuire
(http://www.gartner.com/analyst/7846)|ClaudioDa
Rold(http://www.gartner.com/analyst/10233)|Adam
Sarner(http://www.gartner.com/analyst/11821)|
WilliamMaurer(http://www.gartner.com/analyst/12279)
|FrancesKaramouzis
(http://www.gartner.com/analyst/16395)|JorgeLopez
(http://www.gartner.com/analyst/20865)|RobertA.
Handler(http://www.gartner.com/analyst/25745)|
AndrewFrank(http://www.gartner.com/analyst/27472)
|EliseOlding(http://www.gartner.com/analyst/30243)|
AngelaMcIntyre
(http://www.gartner.com/analyst/34134)|JulieShort
(http://www.gartner.com/analyst/35223)|Michael
Shanler(http://www.gartner.com/analyst/39074)|Ruby
Jivan(http://www.gartner.com/analyst/42374)|Bryan
Taylor(http://www.gartner.com/analyst/44834)|
JenniferPolk(http://www.gartner.com/analyst/46806)|
JakeSorofman(http://www.gartner.com/analyst/44319)
|AlexanderDrobik
(http://www.gartner.com/analyst/11657)|EarlPerkins
(http://www.gartner.com/analyst/25748)|KelsieMarian
(http://www.gartner.com/analyst/46756)

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Summary
Digitalizationandthedigitalbusinessarecatalystsof
changethatareaffectingthehumanmachinerelationship
anddrivingbettercustomeroutcomes.ITleadersshould
useGartner'spredictionsasplanningassumptionson
whichtobasetheirstrategicplans.

Overview
Key Findings
Softwaredesignersareaddingmorehumancentricdesignstobusinessandindividualcomputing
basedsolutions.Machinesaretakingamoreactiveroleinenhancinghumanendeavors.
Digitalized"things"aremakingassistedeconomicdecisions.
Renovatingthecustomerexperienceisadigitalpriority.

Recommendations
UseGartner'spredictionsasplanningassumptionsonwhichtobaseyourstrategicplans.
Evaluatetheneartermflagsthatindicatewhetherapredictionistrendingtowardtruthorawayfromit.
Positionpredictionswithlongertimehorizonsashavingalowerprobabilityofcomingtruethanthose
withshortertimehorizons.

TableofContents
Analysis
WhatYouNeedtoKnow
MachinesAreTakingaMoreActiveRoleinEnhancing
HumanEndeavors
DigitalizedThingsAreMakingAssistedEconomic
Decisions
RenovatingtheCustomerExperienceIsaDigitalPriority
SelectingPredictions

StrategicPlanningAssumptions

Strategic Planning Assumptions


By2018,digitalbusinesswillrequire50%fewerbusinessprocessworkersand500%morekeydigital
businessjobs,comparedwithtraditionalmodels.
By2017,asignificantanddisruptivedigitalbusinesswillbelaunchedthatwasconceivedbyacomputer
algorithm.
By2018,thetotalcostofownershipforbusinessoperationswillbereducedby30%throughsmart
machinesandindustrializedservices.
By2020,developedworldlifeexpectancywillincreasebyahalfyear,duetothewidespreadadoptionof
wirelesshealthmonitoringtechnology.
ByYE16,morethan$2billioninonlineshoppingwillbeperformedexclusivelybymobiledigitalassistants.
By2017,U.S.customers'mobileengagementbehaviorwilldrivemobilecommercerevenueintheU.S.to
50%ofU.S.digitalcommercerevenue.
By2017,70%ofsuccessfuldigitalbusinessmodelswillrelyondeliberatelyunstableprocessesdesigned
toshiftascustomers'needsshift.
By2017,50%ofconsumerproductinvestmentswillberedirectedtocustomerexperienceinnovations.
By2017,nearly20%ofdurablegoods"etailers"willuse3Dprintingtocreatepersonalizedproduct
offerings.
By2020,retailbusinessesthatusetargetedmessagingincombinationwithinternalpositioningsystems
willseea5%increaseinsales.

Analysis
What You Need to Know
Gartner'sTop10Predictionsfor2015andbeyondexamineashiftintheageoldrelationshipbetween
manandmachine,duetotheemergenceofdigitalbusiness.Thatshiftcanmosteasilybecharacterized
asareexaminationoftherolesmachinesplayinoureverydaylives.Computerbasedmachinesarenow
beingusedtocreateaneverexpandingvarietyofexperiencesthatextendhumanendeavors.Inaddition,
themachinesaretakingonmorehumancharacteristicstodevelopamorepersonalizedrelationshipwith
humanbeings.Puttogether,thesetrendswillenableustopredictaneartermfutureinwhichmachines
andhumansarecoworkersand,possibly,evencodependents.
Thisyear'stoppredictionsaregroupedintothreecategoriesthatenvelopetheseideasofhumanmachine
cooperationandgrowth:
Machinesaretakingamoreactiveroleinenhancinghumanendeavors.
Digitalizedthingsaremakingassistedeconomicdecisions.
Renovatingthecustomerexperienceisadigitalpriority.

Machines Are Taking a More-Active Role in Enhancing Human Endeavors


Wesaythatmachinesaretakingamoreactiveroleinenhancinghumanendeavors,becausethe
machinesaremoreconnectedthaneverbefore,theyaresensingtheirsurroundings,andtheyare
becomingsmarter.Becauseofthis,theyhaveanincreasedabilitytosupplement(orevensupplant)
humanjobsandtoreducethecostofoperations.Gartner'spredictionsexaminetheshiftingofcertainjobs
towardbusinessacumenandawayfromrepetitiveprocesssteps,mostlyduetothecreationofmore
machinestoautomateroutinework.And,welookatthecostreductionsinoperationsbroughtaboutby
industrializingandroutinizingprocessesthatarebetterhandledwithsmartermachines.
Theseconceptsareinlinewiththeexpectationswehavehadofcomputingmachinessincetheywere
invented.However,todayweseeariseintheabilityofthemachinestoaffectbothourbusinessdestines
andourlives,withorwithoutourhelp.Aslittleas10yearsago,itwouldhavebeendifficulttoselltheidea
thatacomputermightcreateabusinessmodelthatcouldchallengehumandesignedbusinesses,butone
ofourpredictionsthisyeardoesjustthat.Itexaminestheideathat,ascomputersgainmoreknowledge
abouttheoperationandinteractionsofourbusinesses,theyarebecomingsmartenoughtocreate
businessscenariosthatmightworkbetterinmanycasesthanexistingscenarios.Imagineadisruptive
businessconceivedmostly(ifnotentirely)byamachinebeingyournextchallenge.
Onanotherfront,therapidgrowthofwearabledeviceshasallowedwirelesshealthmonitoringtoexplode
asacategoryofillnessprevention.Thishasgrowntotheextentthatwearablemedicaldevicescannowbe
seenasamajorforceforextendinghumanlifebycementinghealthmonitoringasacommonoccurrence
forusall.
So,whilemachinesarestillperformingandperfectingtherolestheyhavealwaysplayed,wehavenow
evolvedtoapointwherewenowfeelincreasinglycomfortableallowingmachinestoparticipateinactivities
atalevelformerlyreservedforthebrightestofus.Businessinnovationandmedicalexaminationwere
oncesolelythedomainsofhumaningenuity.Nowthesemachinesextendthoseendeavorstoanewlevel.

Digitalized Things Are Making Assisted Economic Decisions

Theincreaseduseofcomputingmachinesindecisionmakingisextendingintotherealmoffinancial
choiceswithincreasingconsistency.Thismakesonebegintothinkabouthowmanyoftheeconomic
decisionswemakewillbesupportedby,thenautomatedthrough,digitaltechnologies.
Oneofourpredictionsthisyeardiscussesthesupportofourbuyingbehaviorbydigitalassistantsthat
helpuslocate,shop,andthenpurchasegoodsandservices.Fewpeopleareunfamiliarwithonline
shoppingthesedays,buttheuseofmobiledigitalassistantsthataregettingsmarterallthetimeisstilla
novelty.Sincetheamountofshoppingaffectedwillbelarge(inthebillionsofdollars),thatnoveltymay
becomeastapleofonlineshoppingrightinthemiddleofthedecade.Infact,customerengagement
throughmobiledevicesisanassumedandexpectedrealityofmostpeopletothedegreethatmobile
commerceisexpectedtobecometoobigforanyonetoignore.

Renovating the Customer Experience Is a Digital Priority


Andthenwecometothecustomerexperience.Thismightseemabitincongruouswhentakentogether
withourdiscussionofmachinesandthings.However,itonlyservestohighlightevenmoretheuseof
digitalmachinestoenhancehumanpursuits.Thecustomerexperiencemaybethemostimpactfulareaof
innovationavailabletobusinessestoday.Withtherapidriseofpersonaldigitaltechnology,customers
havebecomesavvierandmoredemandingabouthowtheywanttointeractthroughtechnology.Nolonger
canabusinessassumethattheexperienceithaswithitscustomersisgoodenough,orthatitwillnotneed
tochangeinashorttime.So,surprisinginnovationsarebeginningtoarisefrompersonalized3D
printing(3DP)topizzasandconsumergoodsbeingdeliveredviadrone.Thepracticaldigitalbusiness
seescustomerexperienceinnovationasthenextfrontier,andhalfofallconsumergoodsproduct
investmentsarelikelytobedirectedtowardimprovingthecustomerexperience.
Whocanignoretheprevalenceoftechnologiesandadvertisementsheraldingtheeaseofuseofproducts
orextolingthevirtuesofcustomersatisfaction?Thecustomerhasallthepowertoday,andrespondingto
thatpowereffectivelywillbringgreatbenefits.However,togetthere,somebusinesseswillneedtotake
risksthatmightnothavebeenevidentinthepast.
Wenotethattheuseofunstablebusinessprocessesisontherise.Unstablebusinessprocessesare
thosethatmaychangetheirexecutionfrommomenttomomentonesthatcannotbereliedonto
operatethesameeverytime.Somecalltheseasynchronousprocessesoradhocprocesses,but
whateverthename,theycanbeunstableandveryagile.Andmakenomistake,thisinstabilitywillbe
deliberate.
Adeliberatelyunstableprocessisdesignedtobeagileandtodynamicallyadaptinpotentiallyunexpected
waystochangingprioritiesandrequirements.Thechangestheseprocessesfaceastheyexecuteina
digitalizedenvironment(see"DigitalBusinessTechnologiesAreChangingtheNatureofChange"
(/doc/code/263983?ref=ddisp))arelikelytobecumulative(serialandfluid)andwillevolvetheprocessas
itgoes.Unlikeastableprocess,theunstableprocessdoesnotdependonrepetitionofknownsteps,but
onadaptingtothesituation.Theinstabilityinherentinthisisusedtoincreaseitsabilitytorespondtoa
widerangeofunexpectedorseldomseendisruptionsunstableflightplatformsmakeagoodmetaphor
(seeNote1).
Agreatpotentialuseofdeliberatelyunstableprocessesiswithindoorpositioningsystems.Aswegain
moreinformationaboutwherepeopleandthingsarewithinabuildingorcomplex,weopenthedoorto
evenmoreinnovationregardingcustomers.Imagineatimewhencustomershaveaccesstostore
discountsbasedonhowoftentheywalkpastthestoreinamall.Imaginetheabilityofcustomersto
capture,carryandshareimagesofproductsinastoreinavirtualshoppingcartthatmapstheirpathto
theitemsthroughmultiplestoresandacrossmultiplevisits.Certainly,theseexperiencesareonthe
horizon,andtheywillenhanceourabilitytodowhathumansdobestacquirethings.
It'snocoincidencethatthesethreecategoriessupporttheidealsofdigitalbusiness.Digitalbusiness
referstobusinessthatblursthedistinctionbetweenthevirtualworldandthephysicalworld,whileusing
digitalassetsand/orcapabilities.Withinthatconcept,thereisanimpliedexpectationthatmachineswill
becomeclosertothehumanexperience,simplybecauseweareusingmoreofourphysicalsurroundings
andresourcestofacilitatedigitalinteractions.Humancontextsuchaslocation,identity,movementanda
hostofothersarenowcrediblebitsofdatathatcanbeinsertedintodigitalprocessestoaffectamore
satisfyinghumanexperience.And,themachinesarehelpinguschangeoursurroundingsthroughtheuse
of3DPtechnologythattakesvirtualrepresentationsandrecreatestheminthephysicalworldtosupport
virtuallyunlimitedusagescenarios.
Wearemovingfromaworldwherepeoplebehavethewaycomputerswork,andtowardaworldwhere
computersworkthewaypeoplebehave.Thismustbethemantraforboththedesignanduseof
computingtechnologyandmachinesinthe21stcentury.Themachineswillnolongerbepassive
responderstohumanrequests.Theywilltakeproactivestepstosolveproblemsandtogeneratevaluable
interactions.Humanswillnolongerbendtothedictatesofprogrammerandhardwaredesigner'swhims,
butwillexpectthesoftwareandhardwaretoadjusttotheirneedsastheseneedsevolve.
Lastyearwestatedthat,"thedayswhendigitalbusiness,smartmachinesandtheInternetofThings
(IoT)changewhatcomputersaremaynotbefaroff."Thisyear,wenoteevenmoreaggressivelythe
strengthofthatproposition.

Selecting Predictions
Theselectionprocessforourpredictionresearchincludedevaluatingseveralcriteriathatdefineatop
prediction.Theissuesexaminedincludedrelevance,impactandaudienceappeal.Morethan160ofthe
strongestpredictionsacrossallresearchareasweresubmittedforconsiderationthisyear.
Ourtoppredictionsareintendedtocompelreaderstoactionandtopositionthemtotakeadvantageofthe
comingchanges,ratherthanbeingdamagedbythem.Clarityandconcisenessarealsoessential
characteristicsofourtoppredictionstheaveragereaderofTheWallStreetJournalshouldbeableto
followeachpredictionandtotraceitseffectsonhisorherareasofinterest.

Thesetoppredictionsareforgeneraltechnologyareas,ratherthanbeingapplicabletospecificindustries.
AseparatereportcoversGartner'stopindustrypredictions(see"TopIndustriesPredicts2014:The
PressureforFundamentalTransformationContinuestoAccelerate"(/doc/code/257905?ref=ddisp)).
Whenreadingthesepredictions,itwillbecomeapparentthatourtoppredictionsarepulleddirectlyfrom
researchthatistopicalandongoing.Theyincludeimplicationsandrecommendationsfororganizations
seekingchangeopportunities.ITprofessionalsshouldexaminethesepredictionsforopportunitiesto
increasetheirsupportforcostcontrol,revenuegenerationandbusinesstransformationinitiatives.

Strategic Planning Assumptions


By2018,digitalbusinesswillrequire50%fewerbusinessprocessworkersand500%morekey
digitalbusinessjobs,comparedwithtraditionalmodels.
AnalysisBy:RubyJivan,FrancesKaramouzis,AlexanderDrobik,RobertHandlerandWilliamMaurer
KeyFindings:
Theconsumerneedtogetfaster,lessexpensiveandbetterproductsandservicesinamodethat
supportsanytime,anyplace,anychannelisfuelingthedigitalbusinessrevolution.Digitaltechnology
availabilityandtheGenerationZobsessionwiththeIoT,ischangingconsumerexpectationsand
increasingthedemandforanagileserviceexperience.
Thedigitalbusinessrevolutionisdrivingsignificantenterpriseinvestmentsforpurposesofleveraging
digitaltechnologies(i.e.,theIoTandmobility)toexploitnewchannelsofcustomers,andaddress
marketdisruptions.Theracetowarddigitalizingbusinessprocessesisrequiringnontraditionaland
specializedbusinessandITskillsandcompetenciesthatarescarceinthemarketforexample,in
datascience,ashortfallof140,000to190,000datascientistsand1.5millionmanagerswiththeskills
tousetheinsightstodrivedecisions).
Withconsumers'preferenceforusingtheInternetandmobileservicestodrivebusinessefficiencies
andoptimizetimemanagement,everyindustryisstrivingtoimprovethecustomerexperienceand
meetthedemandsofGenZbysimplifying,automatingandmakingmoreintelligentendtoend
processes,andminimizingmanualinterventions,enablingtheconsumertoselfserve.
Businesstobusiness(B2B)processesarealsocontinuingtobestreamlinedtodrivedowncostsby
decreasingthenumberofredundantmanualinterventions.Thisisbeingacceleratedbynew
technologiesfocusedonprovidingmoreintelligentandpredictiveprocesseslinkedtotheIoTtospeed
upandautomateevenskilledpeoplebasedprocesses.Inaddition,themovetocloudcomputingis
drivinganewwaveofservicesthataredisplacingtraditionalbusinessprocessesownedandstaffedby
organizations.
Educationalsystemsglobally(andspecificallyinthedevelopedcountries)havebeenslowtochange
theircurriculaandeffectivelyaddresstheneedofspecializedbusinessandITcapabilitytofuture
digitaltechnologiesmarket.Universitygraduatescontinuetolearntraditionalinformationand
communicationtechnology(ICT)andcomputingskillsthatarequicklybecomingobsoleteandsoonwill
nolongerbeneeded.AccordingtoastudyfromresearchersatGeorgetownUniversity
(http://www.usnews.com/news/articles/2013/07/08/reporteconomywillfaceshortageof5million
workersin2020),thecurrenthighereducationgraduationrateisstagnant,andtheeconomywillface
ashortageof5millionworkerswiththenecessaryeducationandtrainingby2020.
AlthoughmanyCEOshaveelevatedITtoatoppriority,andmorethanhalfareplanningtoincrease
theirinvestmentsinIT,CEOscorrectlyperceivetalentastheNo.1constraintongrowth.
MarketImplications:
Therapidevolutionofsocialmediaandmobiletechnologiesisdrivingconsumerbehavior,especiallywith
GenZ,whichgrewupexpectingondemand,speedy,butflexibleservices.CloudservicesandtheIOTare
proliferatingatanunprecedentedratetomeetconsumerdemandandexpectedexperiencefor
example,basedontheGartnerpredictionthat,by2020,theinstalledbaseoftheIoTwillexceed26billion
unitsworldwide(whichisreinforcedbyarecentCiscopressrelease),globallytherewillbe15billion
networkeddevicesin2015,anincreasefrom7billionin2010.Therefore,feworganizationswillescapethe
needtomakeproductsintelligentandtheneedtointerfacesmartobjectswithcorporatesystems.These
Internetconnectionswithpeople,businessandthingsaregeneratinglargeamountsofdata.Thosewho
conquerthedatawithanalysiscanwinanddisruptthemarkettowardextremeprofits.
Thesebehaviortrendsandsupportingtechnologieswillsignificantlychangehowwegoaboutourdaily
livesforexample,refrigeratorscanordergroceries,robotscancollectthemanddroneswilldeliverthem
toyourdoor,eliminatingtheneedforgroceryclerksanddeliverydrivers.Thus,thisnewdigitalbusiness
environmentwillprofoundlychangebusinessprocesses,alongwiththeemploymentdemographicsandthe
needforhighercompetenciesforboththeconsumerandtheprovidersacrossallindustries.
Theneedforspeedandthelargevolumeofactivitiesdueto"ondemand"expectationanduser
experiencecannotbemanagedbyincreasingheadcount.Automation,robotsandtechnology(sensors)
willneedtobeembeddedintheprocessestoachievethescaleneededtomeetconsumerexpectations.
Thus,withtheavailabilityofdigitaltechnologies,inthenearfuture,organizationswillneedhalfthehuman
staffingtomanagetheendtoendprocess.However,thenewtechnologycompetencyroleswillincrease
fivefold,butwillrequiresignificantlydifferentITknowledge,skillsandcompetencies,aswellasnonITskills
generallylackingintraditionalITorganizations,suchasvisioning,strategicthinking,collaboration,
facilitationandorganizationalchangemanagement.
TraditionalITrolessuchasdeveloper,systemengineerandsoftwaretesterwillbeautomatedusing
machinelearning,cognitivetechnologiesandrobotics,whichcollectivelyarereferredtoas"smart
machines."Thoseemployedwillneedtoknowhowtoworkwithsmartmachinetechnologiesandbeableto

programrobots.Theseskillsareneitheravailable,noraretheytaughtineducationalinstitutionspreparing
thegraduatesforthefuture.Forexample,inEurope,themismatchofskillsrequiredversusavailableis
expectedtocreateshortageof90,000ITprofessionalsby2020,whichiswhy,inMarch2013,the
EuropeanCommissionisleadingamultistakeholderpartnershiptotacklethelackofdigitalskillsinEurope
andtheseveralhundredthousandunfilledICTrelatedvacancies.
Demographicsdatashowsthatenrollmentinthesciencesisdown,andscience,technology,engineering,
andmathematics(STEM)graduateshortageshavebeenreported.Noimmediaterelief,orevennearterm
relief,isonthehorizon.A2012reportbyPresidentObama'sCouncilofAdvisorsonScienceand
Technology,forinstance,statedthatduringthenextdecade,1millionadditionalSTEMgraduates
(http://www.whitehouse.gov/sites/default/files/microsites/ostp/pcastengagetoexcelfinal_22512.pdf)will
beneeded.IntheU.K.,theRoyalAcademyofEngineeringreportedlastyearthatthenationwillhaveto
graduate100,000STEMmajorseveryyearuntil2020(http://www.theengineer.co.uk/channels/policyand
business/reportrevealsscaleofuksengineeringskillsshortage/1014081.article)justtostayevenwith
demand.Germany,meanwhile,issaidtohaveashortage(http://spectrum.ieee.org/atwork/education/the
stemcrisisisamyth)ofabout210,000workersinthemathematics,computerscience,naturalsciences,
andtechnology(MINT)disciplines.
Thus,althoughmanyofthetraditionalITrolesandlowtomediumskillprocessworkerroleswillbe
eliminatedbyautomationandartificialintelligence(AI)robotics,therewillbeafivefoldincreaseinhigh
skilledtechnologyworkerstosupportthehighlydigitalbusinessenvironment.Astudycarriedouttoward
theendof2013foundthatBritainwillneed750,000skilleddigitalworkersby2017.Iftheycan'tsupport
thatgrowth,itcouldcosttheU.K.(http://www.techradar.com/news/worldoftech/management/therealityof
thedigitalskillsgap1234023)asmuchas2billioneachyear.
NearTermFlags:
Byendof2015,mostwesterneconomieswillreporta50%increaseinunfilleddigitaltechnologyjobs,
suchasdatascientists.
By2016,20%higherunemploymentinsemiskilledprocessworkerjobsthaninthepast.
By2016,theuseofcloudservices,includingSaaS,forbusinessprocesseswillhaveacceleratedpast
currentforecastsby30%.
Recommendations:
Beginnowtoassesstheskillsneededinyourorganizationtosupportthenewdigitaltechnologies,
processesandenvironment(i.e.,collaborative,withhighlevelsofambiguityandconstantchange)
identifythosewhocanbetrainedbudgetfornewhireswiththerequiredskillsandtrainthosewhoare
capablebyinvolvingthemintoinnovativetechnologyprojects.
Establishateamtoreviewdigitalbusinessopportunitiesinyourorganization.Identifythekeyskills,
technologiesandinfrastructureneededtoserveyourmarkets,anddigitalprocessesinsideyour
organization.Ensurethatemergingprojectsareprotectedagainstorganizationalinertiathatwillonly
delaytheinevitable,whilemissingoutonbusinessopportunities.
Useserviceproviders,whennecessary,forinnovationprojects,beingmindfulthattechnologytransfer
cutsbothways,andembedcapableresourcestolearnnewtechnologydevelopmentand
management.
DevelopnewhiringpracticestorecruitforthenewnontraditionalITroles,suchasAIprogrammers,
processautomationintegrators,datascientistsandIoTengineers.Recruitersshouldpreparefora
dearthofcandidatesandexpandtheirsearchesoutsidethecountryorrecruitfromPh.D.candidates
doingtechnologyresearchpossiblyinlooselyrelateddisciplines,suchasbiologyandecology,
whereanalyzinglivingdataismorecommonplace.
Individualswhoareinlowskillrolesinservicesindustriese.g.,banktellers,groceryclerksanddelivery
drivers,mustconsiderretrainingforotherserviceskillsthatcannotyetbedigitized(e.g.,plumbers,
electriciansandmechanics)toremainemployable.Government,incollaborationwithbusiness
industriesandeducationinstitutions,shoulddefinethejobroles,skillsandcompetenciesneededin
thenextfiveto10yearsandinitiatearoadmaptoprepareforthenextgenerationofemployed
workers.
RelatedResearch:
"SolutionPath:PreparefortheChangingITCareer"(/doc/code/262083?ref=ddisp&latest=true)
"SmartMachinesMeanBigImpacts:Benefits,RisksandMassiveDisruption"(/doc/code/255663?
ref=ddisp)
"Maverick*Research:SurvivingtheRiseof'SmartMachines,'theLossof'DreamJobs'and'90%
Unemployment'"(/doc/code/253498?ref=ddisp)
"ExploittheRiseofSmartNonindustrialRobotsforWorkandHome"(/doc/code/269138?ref=ddisp)
"RioTintoRollsOutAmbitious,Autonomous,MineoftheFuture"(Arisplex)and"RioReplacingTrain
DriversPaidLikeU.S.Surgeons"(http://www.arisplex.com/analysis/riotintorollsambitiousautonomous
minefuture/)(Bloomberg).
"RobotPetsHelpElderlyJapaneseCopeinTsunamiAftermath"(Techcitement)and"AnInteractiveRobot
inaNursingHome:PreliminaryRemarks"
(http://web.media.mit.edu/~coryk/papers/Paro_AndroidScience05.pdf)(MIT)

StrategicPlanningAssumption:By2017,asignificantanddisruptivedigitalbusinesswillbelaunched
thatwasconceivedbyacomputeralgorithm.
AnalysisBy:AndrewFrank
KeyFindings:
AdvancesinbigdataanddistributedcomputinghaverekindledinterestandinvestmentinAI.Google,for
example,recentlyacquiredU.K.AIstartupDeepMindformorethan$500million.IBM'sWatson,which
thrustAIintopublicconsciousnessbywinningatJeopardy,nowprovidesadviceonfinancialproducts,
basedonmarketconditions,lifeevents,aclienthistoryandavailableofferings.Innovativestartupssuch
asPathIntelligenceandQlikviewareprovidingAIbasedbusinessintelligencetoawidevarietyofsectors.
And,in2013,OxfordUniversityestimated
(http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf)that,inthenear
future,AIcouldtakeovernearlyhalfofalljobsintheU.S.
AgentbasedcomputationaleconomicsresearchisthebranchofAIthatseekstomodeldynamicsystems
ofinteractingagentstosimulateeconomicprocessesandmarkets.Onecompany,GrowthScience,is
usingbusinessmodelsimulationtopredictwhetherstartupswillfail
(http://www.fastcolabs.com/3021903/thispredictionalgorithmcantellifyourstartupwillfail),using
algorithmsinspiredbyClaytonChristensen'stheoryofdisruptiveinnovation
(http://www.claytonchristensen.com/keyconcepts/).AnotherexamplecomesfromtheCenterforGlobal
Enterprise(http://thecge.net/),whichispursuingaprogramitcallscomputationalenterpriseanalytics.
Thisseekstodescribecomplexbusinessecosystemsbyanalyzingsourcesofnewsaboutstartups,
productandpartnershipannouncements,andinvestmentdata.
ThedemandforsuchAIapplicationsisbeingspurredbyapotentmixofopportunityandhypedeveloping
aroundthecomingwaveofdigitalbusiness.Theblurringofthephysicalanddigitalworldsbroughtonby
thearrivalofthingsintheInternet,alongsidepeopleandbusinesses,providesfertilegroundforanew
cropofdisruptivestartupsfeaturingnovelmarketplacebusinessmodelsonthecuspofviability.It'san
environmentwherenetworkeffectsandtiming,notjustideas,iscriticaltosuccess.It'snowfeasibleto
combinecomputationaleconomicswithgametheoryandbigdatafromtherealworldtodiscoverandscore
disruptivebusinessmodelsthataresoundenoughtoattractfundingandsucceedinexploitingemerging
technologytodisruptlegacyvaluenetworks.
SupportingEvidence:
Theavailabilityofdata,bothopenandforsale,hasrecentlyexploded,withonerecentestimateclaiming
that90%oftheworld'sdata(http://www.sciencedaily.com/releases/2013/05/130522085217.htm)hasbeen
generatedduringthepasttwoyears.Thisprovidesvirtuallyunlimitedrealworld,realtimeinputinto
analyticmodels.
InaccordancewithMoore'slaw,thecomputingpoweroftheworld'sfastestsupercomputershasincreased
byafactorofmorethan400,000(http://en.wikipedia.org/wiki/TOP500)in10years,from131gigaflopsin
1993to54.9petaflopsin2013,andcloudcomputingismakingsuchresourcesfarmoreaccessiblethan
thedayswhentheyneededtobeontheuser'spremises.
Theworldeconomyhasbecomeripefordigitaldisruption,asevidencedbyglobalmarketplacecompanies
(suchasUberandAirbnb)thataredisruptinggroundtransportationandhotels,respectively.Because
suchbusinessesexhibitnetworkeffects(thatis,theirvalueincreaseswitheachnewparticipant)theytend
toformnaturalmonopolies,butarechallengedbycomplexregulatoryandmarketplacedynamics,which
makethemamenabletocomputationalanalysis.Meanwhile,thewealthcreationupsideofsuccessinsuch
modelsvaluationsinthetenstohundredsofbillionsofdollarsforcompanieslessthanfiveyearsold
representsanirresistibleattractionforcapitalinvestment.
NearTermFlags:
By2016,therateofnewAIrelatedproductannouncementswillrapidlyaccelerate.Through2015,the
mosthighlyvaluedinitialpublicoffering(IPOs)willinvolvecompaniesthatcombinedigitalmarketswith
physicallogisticstochallengepurephysicallegacybusinessecosystems.
By2017,morethan80%ofventurecapitalinvestmentfundswilluseappliedAItomodelandevaluate
investmentopportunities.
Recommendations:
Marketingleaders:Shiftfocusfrompromotinganddistributingexistingofferingstosensingand
anticipatingtechnologydrivenmarkettransformationsanddevelopingstrategiestoleadorreacttoan
acceleratingpaceandintensityofwellplanneddisruptivechallenges.Developskillsinrapidly
establishingbrandvaluepositionsfornewofferings,focusingonthehumanaspectsofstorytelling
wherecomputersstilllackskills.
Businessleaders:Embracetheuseofdataandanalyticstoanticipatedisruptionandanalyze
responsivescenarios.Considerhowtoprovideinfrastructureandinvestmentforincubatingand
scalingrapidgrowthnewbusinessideasandspinoffs.Formtaskforcesthatincludemarketingand
technologyleaderstoinvestigatedisruptivescenariosandthetoolstoevaluatethem.
ITleaders:Elevatethedetectionandanalysisofbusinessdisruptiontothetopofyourlistof
objectivesforsourcingandevaluatingbigdatainvestmentsandprograms.Educatebusinessand
marketingleadersontheimplicationsandlimitationsofcurrentandpotentialAIsystems.
Investorsandentrepreneurs:MakethepotentialofAItoidentifyanddesignnewbusiness
opportunitiesamajorfactorinyourinvestmentplans.

StrategicPlanningAssumption:By2018,thetotalcostofownershipforbusinessoperationswillbe
reducedby30%throughtheuseofsmartmachinesandindustrializedservices.
AnalysisBy:FrancesKaramouzisandRubyJivan
KeyFindings:
Theconsumer'sneedtogetfaster,cheaper,betterproductsandservicesinamodethatsupportsany
time,anyplace,anychannelisfuelingthedigitalbusinessrevolution.Andthedigitalrevolutionis
predicatedonvelocity.Theabsoluteobsessionisspeed,whichisdisplacingcostasthedominant
evaluationcriteriaforbuyingservices.Consumerswantresponses(information,context,insights)
regardingbusinesstransactionsatthespeedofdigitaltransactions,whichisnotahumanphysical
capability.
Theepicenteranddriverofbusinessdecisionshasshiftedfromanenterprisecentricfocustoa
consumerfocus.ConsumerizationofbusinessandITisatopicthatGartnerhaspublishedonfor
severalyears.Themostimportantmanifestationofconsumerizationistheneedforenterprisesto
significantlyimproveandcreateintelligentbusinessoperationsthat"smartly"targettherightconsumer
andknowthecustomer(see"DesignITSelfServicefortheBusinessConsumer"(/doc/code/258742?
ref=ddisp)).
Businessprocessesandtheentirevaluechainofbusinessoperationswillshiftfromalabordrivenand
technologyenabledparadigmtoadigitaldrivenandhumanenabledmodel.Smartmachineswillnot
replacehumans,becausepeoplestillneedtosteertheshipandarecriticaltointerpretingdigital
outcomes.Thus,smartmachineswilldisplacecomplacencyandinefficiencyandaddtremendous
velocitytobusinessoperations.
Withconsumers'preferenceforusingtheInternetandmobileservicestodrivebusinessefficiencies
andoptimizetimemanagement,everyindustryisstrivingtoimprovecustomerexperiencesby
simplifying,automatingandmakingmoreintelligentendtoendprocesses,whileminimizingmanual
interventionsandenablingtheconsumertoselfserve.
Smartmachinesareherethisisn'tafuturefantasyandit'snot10ormoreyearsaway.Smart
machinetechnologyandservicesareavailabletodayinthecommercialmarket(see"DigitalBusiness
InnovationWithSmartMachines"(/doc/code/265758?ref=ddisp)forseveralcasestudies).Smart
machinesdemonstratecertainkeyattributes:Theydealwithhighlevelsofcomplexityanduncertainty
toformhypothesesbasedonwhatthey'velearnedandtheytestthesehypothesestorefine
probabilisticconclusions.Theyhavealsodevelopedabetterunderstandingoftaskspecificcontexts
thanmanypeoplehadpredicted.
MarketImplications:
Thecurrentleadersinagivenindustrywillnotnecessarilyremainthere.Theyneedtoidentify
potentialdisruptorsandstayaheadofthegame.Physicalorknowledgeassetswillnotbeenoughto
"milkthecashcow"ofproductsandservicesforthenextfiveyears.
Newunusualsuspects(enterprises)willproliferatetobringnewproductsandservicestomarketand
quicklygrab"mindshare"ormarketshare.
Consumption"portions"willbemore"bitesized"or"timesliced."Forexample,comparethebusiness
modelofrentingavehiclefromHertzbythedaywithrentingavehiclefromZipcarbythehour.Inthe
oldmodel,youofteninterfacewithatleastonehumanbeing(sometimesasmanyasthree)to
completetherentalcartransaction.Withthezipcar,youneverevenseeahumanbeing.It'salldone
digitally,includingstartingtheengineofthecar.Similarly,forsomeyoungerconsumers,it'sbeen
yearssincetheyactuallywalkedintoabankbranchtotransactbusiness.
Withallthisinmind,hereareafewexamplesofshiftsinbusinessoperationsusingsmartmachinesthat
arereducingTCO.OneofthetopfivemediacompaniesintheU.S.implementedsmartmachine
technologyforoneofitscustomerservicefunctions.Theshiftinbusinessoperationsintheinitialthree
monthperiodincludedreducingtheaveragetimetoresolveacustomerissuefrom18.2minutesto4.5
minutes.Theaveragetimetoaddresstheissuestartedat55seconds(withaheadcountof76)andwas
reducedtotwoseconds(withthesmartmachinetechnologyinplaceand32people).Gartnerhas
documentedanumberofsimilarcasestudiesacrossavarietyofbusinessprocesses,includingwealth
managementinfinancialservices,andintheoilandgasindustry.
Moreimportantly,thetimevaluetorealizethebenefitsandthecommercialtermsforthesetypesofdeals
isatadigitalpace.Theexampleabovewasachievedinthreemonths.Theenterprisehadtopayforany
upfrontcosts,becausethiswasanoutcomebasedmodelinwhichpaymentsweremadewhenresultswere
achieved.Thishassignificantimplicationsastohowproductsandservicesarepurchased.Thebuyer's
expectationsandminimallevelbarwilleventuallyshiftfrom"payingforeffort,"whichisinputbased
(numberoflaborhours,costofmaterialsorparts),to"payingforoutcomes"(whichisaresultdriven
metric).
ThebottomlineisthatGartnerestimatesthat,inlessthanfouryears,therewillbemanytypesofbusiness
operationsinwhichtheTCOwillbereducedbyatleastathirdthroughtheleverageofsmartmachines
andindustrializedservices.
NearTermFlags:
By2015,morethan40vendorswillhavecommerciallyavailablemanagedservicesofferingsthat
leveragesmartmachinesandindustrializedservices.

By2016,morethan$20billionofbusinessoutcomemanagedservicessignedcontractswillbeinthe
marketplace(whichleveragesmartmachinesandindustrializedservices).
Recommendations:
Proactivelyaskyourselftwokeyquestions:Howwillmyenterprisecreatenewdisruptorsinour
industry?Howwillwerespondtobusinessdisruptors(atdigitalspeed)?
Sourcingteams,enterprisearchitectsanddigitalbusinessteamsneedtoworktogethertoaddressthe
threekeylayersofrunthebusiness,growthebusinessandtransformthebusiness.Thiswillbedone
atdifferentvolumelevelsandvelocities.Intherunthebusinesslayer,it'svolumeandprecision(i.e.,
beingontime,onbudgetandonscope).Inthegrowandtransformlayers,it'saboutincremental
innovationandbigchanges(i.e.,transformationalshifts).Thisisbasedonfastfailures,ratherthan
precisionandbeingontime,onbudgetandonscope.
Letthetechnologysuittheusecasethatoperationalizesthebusinessstrategy.Smartmachineswill
revolutionizemanybusinesssectors.Theyrelyonnontraditionaltechnologies(suchasdeepneural
networksandnaturallanguageprocessing)however,theycanalsoincorporate30yearoldexpert
systemsandothertechniques.
Useprecursor"almostsmartmachine"technologiesand"phantomroboticbusinessprocess
automation"togetyouremployeesculturallyacceptingoffullscalesmartmachines.
Donotshyawayfromtechnologiesjustontheedgeofsmartness,anddonotwaitforfulltechnology
maturitybeforestickingyourfootinthewater.Waitingwouldhavebeena$100milliondollarannual
operatingexpensemistakeforRioTinto(see"DigitalBusinessInnovationWithSmartMachines"
(/doc/code/265758?ref=ddisp)).Howmuchcanyoutoleratelosingwhileyouwaitforotherstobuild
thewinningusecases?
RelatedResearch:
"DiligentlyEvaluateOutcomeBasedManagedServicesVersusCapacityDrivenStaffAugmentation"
(/doc/code/246978?ref=ddisp)
"EnhanceYourITAgilityandGrowtheBusinessbyOptimizingtheThreeLayersofAdaptiveSourcing
Strategy"(/doc/code/259903?ref=ddisp)
"BimodalITandAdaptiveSourcingAreCriticaltoDigitalBusinessSuccess"(/doc/code/265879?ref=ddisp)
"RidingtheWaveofIndustrializedLowCostITServices"(/doc/code/219044?ref=ddisp)
"SynergiesAriseattheIntersectionofSmartMachines,theInternetofThingsandDigitalBusiness"
(/doc/code/269139?ref=ddisp)
"DigitalBusinessInnovationWithSmartMachines"(/doc/code/265758?ref=ddisp)
"SmartMachinesMeanBigImpacts:Benefits,RisksandMassiveDisruption"(/doc/code/255663?
ref=ddisp)
"RioTintoRollsOutAmbitious,Autonomous,MineoftheFuture"(http://www.arisplex.com/analysis/riotinto
rollsambitiousautonomousminefuture/)(Arisplex)and"RioReplacingTrainDriversPaidLikeU.S.
Surgeons"(http://www.bloomberg.com/news/20131002/rioreplacingtraindriverspaidlikeus
surgeons.html)(Bloomberg)
"RobotPetsHelpElderlyJapaneseCopeinTsunamiAftermath"(http://techcitement.com/hardware/robot
petshelpelderlyjapanesecopeintsunamiaftermath/)(Techcitement)and"AnInteractiveRobotina
NursingHome:PreliminaryRemarks"
(http://web.media.mit.edu/~coryk/papers/Paro_AndroidScience05.pdf)(MIT)
StrategicPlanningAssumption:By2020,developedworldlifeexpectancywillincreasebyhalfayear,
duetothewidespreadadoptionofwirelesshealthmonitoringtechnology.
AnalysisBy:KenDulaneyandAngelaMcIntyre
MarketImplications:
Extendingtheaveragelifeexpectancyforpeoplehasrevolvedaroundthreemajorerasintechnology:
biological(approximately1500through1930),includingvaccinationsandimprovedsanitationmechanical
(1931through2013),includingcorrectivesurgeryandnonbiologicalaugmentationandreplacement(e.g.,
pacemakers)andgenomelectronic(2015andbeyond).Thegenomelectronicerawillfeaturesimultaneous
innovationsingenometherapiesalongsidetheintegrationoftheNexusofForces(1)intomedicaland
lifestylecomponents.Theywilloperateacrossthespectrumofprevention,interventionandmonitoring.
Theelectronicinnovationswillbemobile,networkedtotheInternet,poweredbythecloud,andlinkedto
extensiveinformation,sensordataandsocialcontextsources.
Solutionsunderdevelopmentwillcreatetheinfrastructureformergingdatarelevanttohealth.Funding
initiativesfromQualcomm,Apple(HealthKit),Google(GoogleFit),Samsung(SAMI),NikeandIntel,among
others,willbuildontherudimentaryinnovationfitnesstrackers,suchasthosefromFitBitorJawbone.In
thepreventionarea,solutionscombininginexpensiveconnecteddevicesandpersonalizedanalyticscould
attacktwoleadingkillerscardiovasculardiseaseanddiabetes.
Thesehealthmonitoringsolutionsalongwithindividualizedincentiveswillhelpchangeunhealthybehavior
attackingrootcausesofdiseases,inparticularobesityandlackofexercise.Insurancecompaniesand
corporatewellnessprogramsareincentivizingpeopletousehealthtrackingdevicestocuthealthcare
costs.Additionaldeathscanbeavertedbyalertingmedicalandemergencyresponseteamstoquicklyaid
apersonhavingaheartattackorotherhealthcrisis.However,weexpectthistohaveonlyaminorimpact
onlongevity,comparedwiththeimpactofpreventionordelay.

In2020,30%ofdeathsinthedevelopedworldcanbepostponedbyhealthmonitoringsolutions.The
UnitedNationspredictsthatlifespansinthedevelopedworldwillincreaseto79yearsby2020.With
healthmonitoringsolutions,thataveragelifeexpectancycanincreaseto79.5years.Since2000,theelder
populationhasincreasedbyafactoroffour,increasingthedemandforhealthcare.From2010through
2015,attheworldlevel,peoplewhosurvivetoage60canexpecttolive20additionalyears.Withthetime
foradoctortoreachmedicalpracticeestimatedat12years,healthcaremustrespondtothedemandwith
evergreaterefficiency.Controllingdemandthroughpreventionordelayisessentialandelectronicswill
playanincreasingrole.
Wearablemonitorsholdhugepromise.Today,asimplewristbandcancollectdataonheartbeat,
temperatureandanumberofenvironmentalfactors.Wirelessheartmonitoringpatches,smartshirtsand
sensorsinaccessoriespromisemoreaccuracy,choiceandcomforttowearers.Transmissionthrough
wirelessisstraightforward.Datacanbecorrelatedagainstlargecloudbasedinformationrepositoriesfor
sanctionedactionsandthroughsocialnetworksforanecdotaladvice.Weexpectdatafromremote
monitoringdevicestoprovidecontinuedaccessfrompatienttomedicalpractitioners.Diabetics'blood
glucosewillbeautomaticallymonitoredandlevelscontinuallyadjusted.Datasecuritywillbeimportant,as
willdatamanagementandprivacy,andwillleadtonewregulationsandbestpractices.Weexpecthealth
monitoringtoexceeda$40billionmarketby2020andtodeliveritshalfyearincreaseinlifespan.
NearTermFlags:
By2017,costsfordiabeticcarewillbereducedby10%throughtheuseofsmartphones.Already
therearestrongmovementstoincorporatesmartphonesinthemanagementofdiabetes.Thereason
thecostparameterissoimportantisthatisakeymotivatingfactorforexpandinguse.Andifcostsare
reduced,itmeansthattherearelowerrecidivismrates,which,inturn,meanthatliveswillbe
lengthened.
By2018,200millionpeoplewillusewearabledevicesthatmeasuretheirheartrates.
By2016,30%ofcorporatewellnessprogramswillcapturebiometricdataaboutemployees.
Recommendations:
Basedonthebroadscaleimpactofthispredictiononthehealthofbillionsoftheworld'spopulation,the
followingrecommendationsshouldbeconsidered:
Medicaldevicesuppliersshouldredoubletheireffortstoparticipateinthehealthmonitoring
technologyarea.
Healthcareprovidersshouldevaluateoutcomeprotocolsforpotentialinclusionofexpandedhealth
monitoring.
Businessesshoulddiscusstheimpactofhealthmonitoringoncostswiththeirhealthcareinsurance
suppliers.
StrategicPlanningAssumption:ByYE16,morethan$2billioninonlineshoppingwillbeperformed
exclusivelybymobiledigitalassistants.
AnalysisBy:AdamSarner
KeyFindings:
Promisingmobiledigitalassistanttechnologies,suchasGoogleNow,SiriandCortana,arealreadytapping
intopreferencesandexplicitcontextlikespokenquestionsandcommands,timeandplace.Theyare
connectingpiecesofneed/wantassessment,informationgatheringandevaluation,allelementsalonga
buyingprocesssansautonomouspurchasing.
ByYE15,mobiledigitalassistantswillhavetakenonmundanetacticalprocessessuchasfillingoutname,
address,creditcardinformation.Fixedeventssuchasgroceryreplenishment(buyingpapertowelsevery
threeweeksorgettingnewfilterforicemaker)willbecommonandwillbuildtrustforthesetypesof
assistantstotakeonmore.ByYE16,slightlymorecomplexpurchasedecisions,suchasbuyingbackto
schoolbackpacks(somethingsuperheroandinstock)andchainedeventssuchasschedulingahighly
rated,datetypemoviealongwithdinnerandcarpickuponananniversarywillbeeasilyachievable.
Yearlyautonomousmobileassistantpurchasingwillreach$2billionannually,representingabout2.5%of
mobileuserstrustingassistantswith$50/year.Digitalassistantswillbeonmultipleplatformshowever,
mobilewillbethemostaccessible,adopteddevicefordigitalassistantsandwillbethe"killerapplication"
byYE16.
Withalmostthreebillionpeopleworldwidenowhavinggoneonline,thedriversareclear.Theexplosive
adoptionandflowofdigitalinformationandtheincreasingareasofchoiceanddecisionmakingfor
facilitatinglifeeventswilltakesomeautomatedhelp.Armedwithuserdefined,filteredpreferences,
demographicandpsychographicinformation,augmentedwiththoseaspectsofourpersonalitythatcompel
ustobuy,mobiledigitalassistants(withasizablebudget)willbegintooffloadareasofourdecision
makingandmakepurchasesonourbehalf,rangingfromthetacticaltothestrategic.
Ourneedtosiftthroughincreasingamountsofinformationtomakepurchasingdecisionswillgrow,andthe
digitalassistantwillbeatoptooltoperformthetask.Withtheabilitytoconnect,gather,sortandprocess
informationbetterthantheindividual,digitalassistantdecisionmakingwillstartfreeingupmorestrategic
lifeevents,takingonassistantroles,suchasthoseofthetravelagent,thefinancialadvisor,thenurse,the
attorney,thecontractor,orthe"wingman."
Businesseswillneedtotakeafreshlookonhowtoinfluence,marketandselltothesekeydecision
makers.Currenttechniquessuchasaskingforsociallikes,buyingpopupsadsorcreatingblastemail
campaignswillnotwinoveramobiledigitalassistant.
NearTermFlags:

ByYE15,mobiledigitalassistantswillhavetakenonmundanetacticalprocesses,suchasfillingout
name,addressandcreditcardinformation.
By2016,2.5%ofmobileuserswilltrustassistantswith$50/year.
StrategicPlanningAssumption:By2017,U.S.customers'mobileengagementbehaviorwilldrivemobile
commercerevenueintheU.S.to50%ofU.S.digitalcommercerevenue.
AnalysisBy:JenniferPolk,MichaelMcGuire
Increasinglypowerfulsmartphonesandtablets,andthecorrespondinglyrichandpowerfulapplications
availableforeach,enableconsumersandbusinesscustomerstointeractseamlesslywithcompanies,
contentandcommerceexperiencesatvirtuallyallstagesofthepurchasingprocess.Productandservice
purchasescanstartonasmartphone,withacustomerusingmobilesearchtoidentifyoptions,migratetoa
tabletwheretheyreviewhowtovideosonYouTube,shifttoscanningabrand'sFacebookpageandthird
partyreviewsitesforcustomerfeedbackviamobileapplications,andendwithasalestransactiononthe
company'smobileenabledwebsiteormobileapplication,orthroughmobilepaymentintheirphysical
locations.
GartnerdefinesdigitalcommerceasthebuyingandsellingofgoodsandservicesusingtheInternet,
mobilenetworksandcommerceinfrastructure.Wedefinemobilecommerceasthebuyingandsellingof
goods(physicalanddigital)andservices(i.e.,bookingandprepayingforservices)bycustomersusing
mobiledevicesaccessingtheInternetviamobilenetworksandcommerceinfrastructures.Mobile
commercedoesnotnecessarilyrequireauniquemobilepaymentcapability,suchasApplePay.Mobile
applications,forexample,enableausertostorepaymentinformation(e.g.,acreditordebitcardaccount),
whichallowstheconsumertocompleteaninapppaymentwithouthavingtoreenterthisinformationfor
eachpurchase.Mobileenabledwebsitesalsoenablecustomerstomanuallyenterpaymentinformation
(e.g.,creditordebitcards).
BasedonApple'srecentannouncementabouttheadditionofApplePaytotheupcomingreleaseoftheir
iPhone6andiPhone6Plus,competitivepressureandmarketdemandformobilepaymentwillincrease.
Roughly220,000merchantsarealreadysetuptoacceptApplePay.Othermobiledevicemanufacturers,
technologyprovidersandcreditcardcompanies(suchasVisa),andmajorretailerssuchasWalMartare
signalizingplanstolaunchtheirownmobilepaymentsolutionsorsupportexistingNearField
Communication(NFC)offerings,suchasGoogleWallet.
Somesectorswillmigratemorequicklythanotherstoacceptingmobilepaymentsandpromotingmobile
commerce.Thiswillbeduelargelytocustomerdemand.Forexample,bigboxretailersmaynotneedto
moveasquicklyasotherindustries(e.g.,travel),becausetheinstoreexperienceisstillacriticalpartof
theirvaluepropositionandthecustomerexperience,makingdigitalandmobilecommerceasmaller
portionoftheiroverallrevenue.However,newcreditcardstandardswillcauseashiftinliabilityfor
fraudulenttransactions.Thisshiftwilltakeeffectin2015,requiringretailerstomakeupdatestotheirpoint
ofsale(POS)systemsforsafercreditcardtransactions.ThisopensthedoorforPOSupdatestoalso
acceptmobilepayment.
Gartnersurveysofconsumers,marketingexecutivesanddigitalcommercedecisionmakersunderscore
thegrowingpowerofmobileinitiatedengagementandthepotentialofmobilecommerce.Theyalsomake
itclearthatmajorindustries,includingretail,arelikelytoseeadifferentgrowthrate:
InarecentGartnersurveyofdigitalcommercedecisionmakersacrossfunctions(see"TheEvolving
RoleofMarketinginDigitalCommerce"(/doc/code/268150?ref=ddisp)),respondentsreportedthat
digitalcommercemakesup30%oftotalrevenue,andmobilecommercegenerates22%oftheirdigital
commercerevenue.
Retailrespondentswereinlinewiththeaverage,reporting22%ofdigitalcommercerevenuefrom
mobilecommerce.Threeotherindustriesreportedanaboveaveragepercentageofmobilecommerce.
Hightechandfinancialservicescompaniesreported24%ofdigitalcommercerevenuecomesfrom
mobilecommerce,andcompaniesinthemediaindustryreported23%mobilecommercerevenue.
Globally,26%oftabletusersand20%ofsmartphoneusersinGartner'sConsumerStudyreported
usingdevicestobuyproductsorservices.(ThesurveywasconductedinAugust2013andcovered
21,514respondentsineightdevelopedcountries,U.S.,U.K.,France,Germany,Italy,Japan,China
andBrazil.)
Mobilecommercewillbecomeasignificantsaleschannelthrough2017,beginningtorivalecommerce
astheleadingdigitalchannelforretailers(see"MultichannelRetailersShouldPrepareforanE
CommerceSlowdownandanMCommerceTakeoff"(/doc/code/259333?ref=ddisp)).
Gartnerbelievesthat,asdevicemanufacturersandapplicationdevelopersimproveusabilityand
functionalityandaddressusers'securityconcerns,deviceswillbecomeevenmoreofanessentialtoolfor
customers,particularlyyoungerdemographics.Thelinkbetweenmobileengagementandmobile
commercewillbecomeevenmoredynamicandmoreprominent.Customerswhogrewupusingthe
Internetasacommunications,informationandtransactionplatform,andtetheredtotheirmobiledevices,
willdemandthatserviceprovidersandretailersdeliverontheexpectationofconnectedandchannel
agnosticcommerceexperiences.RecentannouncementssuchasApplePaywillincreasecompetitive
pressuresandexpeditechangesinconsumerbehavior,whichwill,inturn,drivetheexpectationsof
individualsasbusinessbuyers.
NearTermFlag:
Renewedinterestinmobilepaymentisexpectedby2015,alongwithasignificantincreaseinmobile
commerce,dueinparttotheintroductionofApplePayandsimilareffortsbycompetitors,suchasGoogle
increasingeffortstodriveadoptionofitsNFCenabledGoogleWallet.

Recommendations:
Organizationswithdigitalandmobilecommerceinitiativesneedtofocusonencouragingthe
developmentofcrossfunctionalteamsmarketing,IT,sales,customersupport,legal,etc.to
createseamlesspathtopurchaseexperiences,andpostpurchaserelationshipswithconsumerswho
areincreasinglyusingmobiledevicestoresearchandpurchaseproductsandservices.
Mobilemarketingteamsshouldinvestigatehowtoleveragemobilewallets,suchasApple'sPassbook
andGoogleWallet,withtheexpectedreinvigorationofconsumerinterestinmobilecommerceand
payments.
RelatedResearch:
"WhattheGrowthinMobileCommerceMeanstoMarketers"(/doc/code/266100?ref=ddisp)
"MultichannelRetailersShouldPrepareforanECommerceSlowdownandanMCommerceTakeoff"
(/doc/code/259333?ref=ddisp)
StrategicPlanningAssumption:By2017,70%ofsuccessfuldigitalbusinessmodelswillrelyon
deliberatelyunstableprocessesdesignedtoshiftascustomers'needsshift.
AnalysisBy:JulieShort,EliseOlding,ClaudioDaRold
KeyFindings:
Manyorganizationsarebeginningorinthemidstofdigitalbusinesstransformationinitiatives.Gartner
predictsthat30%oftheseeffortswillbesuccessful.Thereasonforthissuccessisattributabletofour
importantdifferentiatingfactors:
Innovatedbusinessmodelsthatharnesstechnologyastheenabler.
Businessprocessesthataredesignedtobesupermaneuverable,enablingthemtoshiftascustomer
needsshift.
Theembracingofstandardizationandvariablebusinessprocesses,referredtoasdeliberately
unstableprocesses,enablingthemtoproductivelyscaleandseizeopportunitiesasneeded.
Organizationalliquidity,whichenablestheorganizationtochangereadilyandseamlesslywhenfacing
significantchange.
MarketImplications:
Tobepartofthe30%thatimplementsuccessfuldigitalbusinesstransformationinitiatives(seeNote2),
businessandITleadersmusttakeboldaction,whethertheyarereadyornot,toinnovatetheirbusiness
modelsandchangethewaytheirorganizationsfunction.BusinessandITmustbeagileandadaptableto
change.Theymustbewillingandabletoinnovatethewaytheyaredoingbusiness,radicallyrethinking
theirbusinessmodels,andnotsimplyapplydigitaltechnologytoexistingbusinessmodels.Theymustbe
readyandwillingtoinnovaterapidlyfromabusinessmodel,businessprocessandtechnologyperspective.
Rapidinnovationaccompaniedbyconstantchangeeffortswillrequireabimodalapproach.Bimodalmeans
thatITandtherestofthebusinessmustnowoperateattwospeedsonethatrenovatesthecoreof
traditionalITandanotherthatfocusesoninnovation.ITandbusinessleadersmusttransformtheir
organizationstobecomemoreagileiftheyexpecttomeetthedemandsofthedigitalbusinessera.The
windowfordigitalbusinesstransformationwillnotstayopenforever.Thetimeisnow.
Asaresultofbusinessmodelinnovation,somebusinessprocessesmustnowbedeliberatelyunstable.
Deliberatelyunstableprocessesaredesignedforchangeandcandynamicallyadjustaccordingto
customerneeds.Theyarevitalbecausetheyareagile,adaptableand"supermaneuverable"(seeNote3),
accordingtoshiftsincustomerneeds.Thesesupermaneuverableprocessesexistwithinthecontextof
larger,morestableprocesses.Theyareacompetitivedifferentiator,becausetheysupportcustomer
interactionsthatareunpredictableandrequireadhocdecisionmakingtoenablethelarger,morestable
processestocontinue.Theyareoftenimpossibleforothercompetitorstoduplicate.
OneexampleisPugachev'sCobramaneuveroraJturn(seeNote4),whichstable,traditionalaircraft
cannotduplicate.Itisimperativetobreakthelinearmindsetofbusinessprocessesanddeploythe
spectrumfromstandardizationandvariableprocessestoreapthebenefitsofdigitalbusiness.Theneed
forthisshiftisintensifiedbytheintroductionofthingsintothebusinessenvironment(seeNote5).As
thingssuchsmartmachinesbegintogeneraterealtimeinformationtoothermachines,business
processesmustbedesignedforchangetoenableorganizationstoexploitthisinformation.Large,stable
processesthathavenoabilitytodynamicallychangeaccordingtonewinformationwillnotenable
organizationstodeliveronthepromiseofdigitalbusiness.
Forexample,theremaybeunstableprocessesinacrowdsourcedinsuranceorganization,suchas
competitivelendingscenarios,orinhospitalityservicessuchasAirBNB,whereanyonecanpostalistingto
competewithhotels.Theseexamplesfollowroutine,endtoendprocesses,butrelyonunderlying
relationshipsandstepswithlotsofvariability,volatilityandchangeability.
Deliberatelyunstableprocesseswillmandateadrasticshiftintheabilityofanenterpriseanditspeopleto
changeinamorefluidmanner.Theabilitytochangefasterwillleveragetheconceptsoforganizational
liquidity.Thisholisticapproach,blendingbusinessmodel,processes,technologyandpeoplewillfuel
digitalbusinesssuccess.
TheBottomLine:Tobesuccessfulindigitalbusinesstransformation,innovateyourorganization's
businessmodel,beginningwithanewcustomerinteractionstyle,developorganizationalliquidityand
engageinorganizationalchangeapproachestoenablekeysupermaneuverableprocessesthatadaptto
keybusinessmoments.Theorganizationsthatdosowillconquersustainableinnovationand
differentiation.

NearTermFlag:
Bytheendof2015,5%ofglobalorganizationswilldesignsupermaneuverableprocessesthatprovide
competitiveadvantage.
Recommendations:
Innovatebusinessmodelsandfocusonusingtechnologyasanenablerforthisinnovation.
Designsupermaneuverablebusinessprocessesthatareagile,adaptableandchangeascustomer
needsshift
Createanagile,responsiveworkforcethatisaccountable,responsiveandsupportsyour
organizationalliquidity.
RelatedResearch:
"GetReadyforDigitalBusinesswiththeDigitalBusinessDevelopmentPlan"(/doc/code/263766?
ref=ddisp)
"MarketInsight:BusinessConsultanciesMustShapeNotMerelyEnableDigitalBusinessTransformation"
(http://www.gartner.com/document/2829319?ref=QuickSearch&sthkw=JulieShort&refval=141351048)
OrganizationalLiquidityReadiesEnterprisesforDigitalBusiness
(http://www.gartner.com/document/2678517?ref=QuickSearch&sthkw=eliseolding&refval=141350926)
DriveInnovationandBigChangeEffortsWithTry,Harvest,AmplifyandChallenge
(http://www.gartner.com/document/2760918?ref=QuickSearch&sthkw=EliseOlding&refval=141356918)
ANewArchitectureandSourcingStrategyforCustomerDrivenServicesatTelenor
(http://www.gartner.com/document/2669518?ref=QuickSearch&sthkw=Telenor&refval=141351067)
StrategicPlanningAssumption:By2017,50%ofconsumerproductinvestmentswillberedirectedto
customerexperienceinnovations.
AnalysisBy:JakeSorofman
KeyFindings:
Gartnerresearchshowsthat,by2016,89%ofcompaniesbelievethatcustomerexperiencewillbe
theirprimarybasisforcompetition,versus36%fouryearsago.
AccordingtoGartnerresearch,fewerthanhalfofcompaniesseetheircustomerexperience
capabilitiesassuperiortopeershowever,twothirdsbelievethesecapabilitieswillbeindustryleading
ormuchmoresuccessfulthantheirpeerswithinfiveyears.
Tomeetthechallenge,Gartnerresearchshowsthatnearlythreequartersofcompaniesexpectto
increasetechnologyspendingoncustomerexperiencein2015.
Forthethirdyearstraight,aDeloittesurveyof4,047consumersacross28productcategoriesand
350brandsfoundbrandloyaltydecliningsignificantly.
DigitaldisruptorssuchasUber,NetflixandZapposarechallengingincumbentswithnativedigital
experiencesthatarebetteralignedtoourconnectedhabits.
Gartner's2014CEOSurveyshowsrevenuegrowthasthemostpressingstrategicmandatein
businesstoday.Whenaskedforthetoppriorityintechnologyrelatedbusinesscapabilitiestosupport
thisgrowthagenda,CEOsidentifieddigitalmarketing,followedcloselybycustomerexperience.
CEOsexpectthisgrowthtocome,byandlarge,fromexistingcustomers.Gartnerresearchshowsthat
customerretentionandgrowingexistingcustomersarethetoptwodriversofcustomerexperience
investmentsat82%and79%,respectively.
A2014globalstudybyMcKinseyfindsthat,ofalldigitalpriorities,engagementofcustomers(ineffect,
digitalcustomerexperience)ranksfirstinbothpriorityandspending,aheadofdigitalbusinessmodel
innovation.
MarketImplications:
Inmanyindustries,hypercompetitionhaserodedtraditionalproductandserviceadvantages,making
customerexperiencethenewcompetitivebattlefield.Thisisnotruerthanindurableconsumerproducts
markets,whichfacedisproportionatecommoditypressureasconsumeraccesstopricingandproduct
informationviasearchandsocialchannelsunderminebrandloyalty.Therealityisthatfocusinginnovation
onnewproductsandevennewbusinessmodelsissubjecttoshrinkingperiodsofcompetitive
advantage.Competitorsandalternativesabound.
Perhapsmoretothepoint,accordingtoaBooz&Coreport,afull46%ofrespondentssaytheir
companiesarejustmarginallyeffectiveoraverageatgeneratingideasandconvertingthemtocommercial
opportunitiestobeginwith.Formostcompanies,asustainableinnovationpipelineissimplyoutofreach,
andisadistantaspiration.
IncreasingspendingonR&Ddoesn'talwaysequalbetterinnovation.AccordingtoaBooz&Co.report,
AppleandGooglerankfirstandsecondinglobalinnovationperformance,whiletheirR&Dspendingranks
43rdand12th,respectively.What'sthedifference?Experienceinnovation,acustomerdrivenapproachto
designingforsimplicity,convenienceanddelightateverycustomertouchpoint.

Therealityisthatproductinnovationissubjecttoacceleratingcommoditization.Customerexperience
innovationisenduringthesecrettolastingbrandloyalty.AccordingtoarecenteConsultancystudy,
89%ofcompaniesseeagreatcustomerexperienceasavitalrequirementfordrivingbrandloyalty.
NearTermFlags:
By2015,morethanhalfoftraditionalconsumerproductswillhavenativedigitalextensions.
By2016,nearly90%ofconsumerproductcompanieswillhaveappointedachiefcustomerofficer.
Recommendations:
Investincustomerinsightthroughpersonaandethnographicresearchthatrevealsadeeper
understandingofthepatternsandpreferencesofgrowingdemographics.Here,thefocusshouldbe
onexperienceinnovationsthatdelivertheconvenienceanddelightthesecustomershavegrownto
expect.
Ifyouhaven'tdonesoalready,considerappointingachiefcustomerofficerasthelocusof
responsibilityandauthorityfordrivingexperienceinnovationsacrosschannels.
LooktonativedigitaldisruptorssuchasUberforexamplesofexperienceinnovationexecutedwithout
theburdenoftraditionalpreconceptionsandconventionalassumptions.
Breakoutofthehabitofincrementalfeaturedriveninnovationinfavorofexperienceredesignsthat
takeboldstepstowarddeliveringtransformationalcustomerexperience.Indoingso,redirect
traditionalproductinvestmentstocustomerexperienceinnovations.
RelatedResearch:
"AgendaOverviewforCustomerExperience,2014"(/doc/code/264190?ref=ddisp)
"Toolkit:AMarketer'sChecklisttoGuideCustomerExperienceEfforts"(/doc/code/265984?ref=ddisp)
"UsePersonastoDriveExceptionalCustomerExperiences"(/doc/code/265985?ref=ddisp)
"HowtoDesignCustomerExperiencesUsingPersonaDrivenBuyingJourneys"(/doc/code/264694?
ref=ddisp)
"BeyondNetPromoterScore:TheEvolutionofCustomerExperienceMetrics"(/doc/code/257646?
ref=ddisp)
"SephoraCMO:HowDigitalBecameCoretoSephora'sBrand,CultureandCustomerExperience"
(/doc/code/265002?ref=ddisp)
StrategicPlanningAssumption:By2017,nearly20%ofdurablegoodsetailerswilluse3Dprintingto
createpersonalizedproductofferings.
AnalysisBy:MichaelShanler
KeyFindings:
Durablegoodsmanufacturersareincreasinglylookingtowardtechnologiesthatenableashiftfrom
offering"configurable"productstomorepersonalizedproductsthataretailoredtowarddiverse
consumerneeds.
Manufacturersareincreasinglyleveraging3DPtechnologiestoenablenewdesignpossibilities.Most
durablegoodsmanufacturershavealreadyusedorevaluated3DPforprototyping,andarebeginning
topushthetechnologyintotheextendedmanufacturingandarebuildinginfrastructurestosupport
engineertoorder(ETO)processes.
By2018,Gartnerexpectsthatnearly50%ofdiscretemanufacturerswilluse3DPtoproducepartsfor
productstheysellorservice.
by2018,the3DPmarketwillgrowtomorethan$13.4billion.
Etailersarepoisedtoaddportalbased,customerfacingpersonalizationcapabilitiesviadigital
businesschannels.Tosupportthistransition,ITandbusinessgroupsaredevelopingstrongerback
officecapabilitiesthatsupport3Dmodelingandcoreproductlifecyclemanagement(PLM)systems
thatinterfacewithCRM,ERPandmanufacturingsystemtechnologies.
MarketImplications:
Althoughmanymanufacturingtechnologiescreateandassemblegoods,3DPtechnologyisagame
changer.Thisisespeciallythecasefortheproductionofconcepts,firstgenerationproductsandlow
volumemanufacturingruns.Theadvancesin3DPtechnologyandtheubiquityof3DPservicesduringthe
nextfewyearswillcreateanewdemocratizedmanufacturingecosysteminwhichthedesignanddelivery
processcanbemadeextremelyflexible.Asaresult,virtuallyanycompanycancreate,engageandlaunch
aprototypeorsellaproductthatusesanETOprocess.
3DPisalreadyhavingaprofoundimpactbyenablingstartupstoreduceinfrastructurecosts,compared
withtraditionalmanufacturingprocesses.Leveraginga3DPservicebureausignificantlylowersasmall
company'sbarriertoentryfromacapitalperspective.Theseservicebureausalsoenablelargecompanies
tobranchoutintonewproductdevelopmentareas,whilemitigatingcapitalrisks,andreducingproject
costsandoverallexpenditures.

Asconsumersincreasinglylooktocontrolmoreproductsfeaturesandcapabilities,etailersare
recognizingthebusinesspotentialofmovingfrom"configurable"products(e.g.,freezerwithdifferent
finishes,icemaker,etc.)to"personalized,"madetoorderproductsenabledby3DP.Examplesof
personalizeddurablegoodsenabledby3DPtechnologiesincludeawidevarietyofeverydayproducts.
Majorbrandshaveeitherinitiatedpilotsorcreatedpartnershipsinthedigitalsupplychaintooffer:
Eyeweartailoredtoindividualconsumers'facialprofilesandstylisticpreferences
Helmets,boots,shoescustomdesignsandfit
Bicycleframes,skis,skateboards,huntingandsportingfirearmsdesignedspecificallyforcustomers'
bodytypes,height,weight,inseams,grips,etc.
Fashion,handbags,preciousmetaljewelryprintedondemandavarietyofmaterials
Toysmadetoorder,customized,"Udesignit,"etc.
Homefurnitureanddcorwallpanels,pictureframesandlightingfixtures
Almosteverydurablegoodcategorywillseeasurgein3DPenabledpersonalization,asmanufacturers
developcapabilitiesforbringingtheconsumerclosertothedesignexperience.However,thereare
challengesthatmustbedealtwithearly.Thecompaniesthatsetthestrategyearlywillendupdefiningthe
spacewithintheircategories.Thisrequiresacorporateculturethatissupportiveofnonconformance
products,newfrontoffice"concierge"businesscapabilities,andbackofficeITandoperationsskills.Itwill
requireanewagilitythatgobeyondrigidprocessautomation,andmayrequireentirelynewbusiness
systems.ItrequiresITleaderstoupdatetheirendtoendprocessfororderplacement,orderbuildand
delivery.
TheCIOsatetailersthatputintoplaceflexiblePLMcentricsystemswillgetaheadstartandbecome
leadersinthefield,becausethe"personalized"productsmayrequireadifferentbillofmaterials(BOM)for
everyorder.Keepingtrackofthedigitalpiece,maintainingchainofcustody,andvalidatingsystemsand
processestodeliveroneoffproductsrequiresCEOstoleadachangeofculture.Itrequiresbusinessand
ITleadershiptoembraceinnovationpractices.Thelargerenterprisesengagedwithserialinnovations,
mustbeabletocopewithariskmitigatingleveloffailure(e.g.,failfastandinexpensive)beforeseeing
commercialsuccessesandthecreationofnewvalue.
Numerousopportunitiesareassociatedwithdeliveringpersonalizedproducts:
Sociallyengageddesigninnovation:Customerswillbeabletocreatetheirowninnovations,and
socializetheseinalargercommunity.This,inturn,canleadtoperpetualengagementcycles,
referenceconsumersandimprovededucation.
Newserviceandsupportmodels:Newcustomerfacinginterfacesneedtobesupportedbyeasy
touseinterfacesandmayneedtobeaugmentedwithservicestosupportcustomers.
Brandengagementandloyalty:Allowsconsumerstointeractwiththeirfavoritebrandsatamore
intimatelevel.
Reductionininventoryinthesupplychain:Companiesthatpreviouslyhadtostockparts,can
nowprintpartsandassembliesondemandthroughfacilitiesandextensive3DPservicebureaus,thus
reducingstockandunusedinventories.
Novelcustomerexperiences:Etailerorderportalsandproductrequestsystemsareincreasingly
supportingmoresophisticatedproductrequestsandcustomizations.Thecompaniesthatmakethisan
enjoyableexperiencewillberewardedwithrepeatbusiness.
NearTermFlag:
By2015,morethan90%ofdurablegoodsetailerswillactivelyseekexternalpartnershipstosupportthe
new"personalized"productbusinessmodels.
Recommendations:
CIOs,productdevelopmentleadersandbusinesspartnersshould:
Evaluatetheirbusinessopportunitiestoleverage3DPtechnologiestocreatepersonalizedofferingsto
provideabetterendtoendconsumerexperience.
Evaluategapsbetweentheexisting"asis"andfuture"tobe"stateprocesses,skillsandtechnology.
Determinewhatinvestmentsarenecessaryandyourabilitytoadapttoanewanddisruptivemodel.
RelatedResearch:
"HypeCyclefor3DPrinting,2014"(/doc/code/263487?ref=ddisp)
"StrategicTechnologyTrends3DPrintingTransformsOrganizations"(/doc/code/259692?ref=ddisp)
"Predicts2014:3DPrintingattheInflectionPoint"(/doc/code/259185?ref=ddisp)
"Forecast:3DPrinters,Worldwide,2013"(/doc/code/255101?ref=ddisp)
"UsetheGartnerBusinessModelFrameworktoDeterminetheImpactof3DPrinting"(/doc/code/246804?
ref=ddisp)
StrategicPlanningAssumption:By2020,retailbusinessesthatusetargetedmessagingincombination
withindoorpositioningsystemswillseea5%increaseinsales.

AnalysisBy:BryanTaylorandKelsieWelch
KeyFindings:
Digitalmarketersareincreasinglyfocusingonmobileadvertisingandadvancedanalyticstotake
advantageoftherichopportunitiespresentedbythegrowthofmobiledeviceusage.
Duetoawideandblurringsetofchannelsforexample,mobileWeb,inapp,emailandSMStext
contextisplayinganincreasinglycentralroleintheseefforts,enablinghighlytargetedadsbasedon
recentpurchases,buyinghabits,cityofresidenceandinterests.
Recently,theuseofindoorpositioningsystemshasbecomeincreasinglyviable.Ratherthanusing
satellites,thesesystemsuselowenergyBluetoothbeaconsandWiFiaccesspointstopinpointa
mobiledevice'slocationinsideabuilding,withaccuraciesinthecentimeterrange.
Supportwithinnewermobiledevicesforindoorpositioningsystemswillenablelocationcuesfor
targetedadsandmessages,aswellasrealtimemappingtoleadcustomerstostorelocationsandto
specificproductsthemselves.
NearTermFlags:
By2016,therewillbeanincreaseinthenumberofoffersfromretailersfocusedoncustomerlocation
andlengthoftimeinstore.
By2017,sevenofthe10largestretailerswilluseindoorpositioningsystems,combinedwithmobile
apps,toaidshoppersinquicklylocatingdepartmentsandproducts.
Recommendations:
Duringthenextthreetofiveyears,retailershaveanopportunitytoimprovesales,margins,
satisfactionandfrequencyofvisitsinstorethroughthedeliveryoftargetedpromotionsusingthese
technologiestospecificcustomersorcustomersegments.Bycombiningrealtime,contextual
informationandadvancedanalytics,retailerscandeterminethebestoffertodeliverinrealtimetothe
customer.Forexample,theycanuseconsumers'locationssharedfromtheirmobilephonesand/or
socialnetworkactivitieswhileinashoppingmalltocreatecontextuallyrelevantoffersfornearby
stores.Combinethiswithindoorpositioningsystems,andcustomersthatacceptsuchofferscouldbe
directedinrealtimetothestore,aswellastothespecificsaleitemsthemselves.
Retailersthatareconsideringtargetingcustomerswithrealtimeofferswillrequiregoodcustomerdata
acrossallinteractionchannels,contextawaredata(forexample,location,recentpurchasesorbuying
history),andavehiclebywhichcustomerscanreceiveandrespondtooffers.Offeracceptanceand
conversioncanbeconstrainedbytheperformanceofthedeliverysystemsandofferrelevance,which
playakeyroleinthecustomerexperience.
Retailersshouldnotattempttosupplycustomerswithrealtime,customizedoffersincontextaware
situationsuntiltheyareconfidentthattheyhaveadequatesegmentationandbehavioralanalysis.The
promisetoprovidemeaningful,relationshipbuildingandrelevantofferscanfrustrateoroffend
consumersiftheyarrivelateorseemirrelevant.Offerexecutioninlinewithbasiccustomerexpectation
alsoplaysanimportantrole.Forexample,itisnotenoughtosendtimelyandrelevantpersonalized
offerstheproductmustbeinstockwhenthecustomerredeemstheoffer.
SupportingEvidence:
Accordingtoa4Q13Gartnersurvey,twothirdsoftoday'sconsumersreportengaginginshopping
activitiesonmobiledevice.Asaresult,retailers'opportunitiestoaccessandinteractwithconsumerson
theirowndeviceshasalsoincreased.Duringthepastfewyears,thenumberofconsumerswhohave
sharedtheirlocationwithashoppingapplicationcontinuestoriseasof4Q13,21%ofconsumers
reportedsharingtheirlocationwitharetailerviamobiledevices.
Asconsumersbecomemorecomfortablesharinginformationwithretailers,anopportunitytoimprove
sales,margins,satisfactionandfrequencyofvisitsinstorehasarisenthoughtheuseofindoorpositioning
systemsandtargetedoffers.Bycombiningrealtime,contextualinformationandadvancedanalytics,
retailerscandeterminethe"bestoffer"todeliverinrealtimetothecustomer.Forexample,aretailermay
useconsumers'locationssharedfromtheirmobilephonesand/orsocialnetworkactivitieswhileina
shoppingmalltocreatecontextuallyrelevantoffersfornearbystores.Combinethiswithindoorpositioning
systems,andcustomersthatacceptsuchofferscouldbedirectedinrealtimenotonlytothestore,butto
thespecificsaleitemsthemselves
Althoughthedeliveryoftargetedpromotionsusingthesetechnologiestospecificcustomersorcustomer
segmentsisbecomingmoreviable,andconsumerinterestinreceivingthemhasgrown,theincreasingly
complexmultichannellandscapeposeschallengestoexecutingrealtime,targetedofferswithout
compromisingconsumerexperiences.Therefore,retailersmustselectivelyidentifytherightconsumersas
candidatesforreceivingtheseoffers,whileensuringconsistentexecutionfromthedeliveryoftheofferto
thePOS.
Onceoneortworetailersexecutetargeted,contextualofferswellonalargescale,consumerexpectations
forcapabilityanddeliveryforallretailersattemptingcontextualizedofferswillrise.
RelatedResearch:
"SurveyAnalysis:MobileRealTime,PersonalizedOffersWillFailWithoutTransparencyofIntentand
MultichannelConsumerInsight"(/doc/code/262728?ref=ddisp)
"HypeCycleforRetailTechnologies,2014"(/doc/code/263172?ref=ddisp)

"InnovationInsight:IndoorLocationTechnologiesTheLoomingBattleBetweenBluetooth,WiFiand
OtherWirelessTechnologies"(/doc/code/262596?ref=ddisp)
"HowMobileWillAffectITLeadersSupportingMarketingTechnologies"(/doc/code/264061?ref=ddisp)
"IndoorLocationSensingTechnologiesEnableNewContextualExperiences"(/doc/code/263859?
ref=ddisp)

Note 1
A Short Description of Unstable Platforms
TheF16fighterjetwasoneofthefirsttotakeadvantageofdeliberateinstability.Quadcopterdronesare
likewiseunstableandrequirecontrolsoftwaretoremainstableinflight.Thefactthattheseplatformsare
unstablemakesthemmoreagileundersoftwarecontrol.Theycanadaptmorereadily.Digitalbusiness
givesustheopportunitytoexaminebusinessprocessesthatareinherentlyunstabletomakeabusiness
moreagileandadaptive,andwewillapplythattoimprovingcustomerexperiences.Forexample,
crowdsourcingbringsaneedforprocessesthatchangetofitcrowddynamics.Organizationalliquidity
speakstoanincreasedneedforagilityandadaptability.Insomeways,theseprocessescouldbereferred
toassupermaneuverable,becausetheyaredesignedforchange.Digitalizationforcesmorefluidicchange
intoourbusinesses,andthosewhocannotadaptwillsuffer.

Note 2
Organizational Maturity
CIOsexpecttheirorganizationstomaturerapidlyduringthenext18monthsandtomovefrom"niche"
statusto"leaders"indigitalbusinessinnovationhowever,theirexpectationsarelargelyunrealistic70%
arelikelytofail(see"BiModalITandAdaptiveSourcingareCriticaltoSuccessinRapidDigitalInnovation"
(/doc/code/265879?ref=ddisp)).

Note 3
Supermaneuverability
SukhoiTestPilotExplains"Supermaneuverability"(http://aviationweek.com/awin/sukhoitestpilotexplains
supermaneuverability):Su35Smaneuverspointtocombatcapability

Note 4
Pugachev's Cobra
TheSukhoiCobra(http://en.wikipedia.org/wiki/Pugachev's_Cobra)

Note 5
Herbst Maneuver
TheJturn(http://en.wikipedia.org/wiki/Herbst_maneuver)

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shallhavenoliabilityforerrors,omissionsorinadequaciesintheinformationcontainedhereinorforinterpretations
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