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The (i)’s Have It

Tuesday, November 16th, 2010

By Mark P. Dangelo

www.Innovative-Relevance.com

As the holidays approach, one of the most asked for gift genre’s surrounds (i)ndividual gratification devices – iPad, iTouch, iPod, iPhone, and  iShuffle.  Since Apple’s initial 2001 device series début, a breadth of new consumer behaviors and technology solution industries have been developed.  Moreover, robust “App Stores” have been created to promote adoption, spur entertainment sales, and lock-in loyal consumers with premium content and pricing.

As these devices have gained in sophistication and functionality, new mobility market segments have been formed and expanded within healthcare, finance, entertainment, capital markets, and even housing.  And, how can you argue with such stellar success in the last decade? 

The i-Reality

With nearly 300 million iPod’s, over 60 million iPhone’s, and 10 million iPad’s (from zero in just 9 months in 2010), the widespread consumer utilization of “i-like” devices has forever altered the interfaces and interactions within the global consumer base of 25-45 year olds.  This is a profitable bracket within a growing affluent segment that has an average yearly income above $50,000.

And, that is just Apples’ success.  Full-featured tablets are now being offered from stalwarts Samsung and Rim (i.e., BlackBerry) as the size of the tablet and netbook markets for 2011 are projected to reach 75 to 90 million units.  Additionally, there are predictions that the demand for these new tablets alone will grow 150% to 180% per year until 2012, reaching an annual sales volume over 60 million units by 2013. 

Looking beyond the most recent mobility offering of tablets, there is a growing base of smart devices that reached sales of nearly 400 million units in Q3 2010.  Of that number, nearly 25% were attributed to open source operating systems such as Google’s Android. 

Estimates now place the number of sophisticated mobile devices at nearly 6 billion in just five years – roughly 90% of the global population with 85% having a built-in QWERTY keyboard (physical or digital).  

So while the markets for these device classes grow at hyper rates, why is it important to those in the housing and financial markets? 

Banking, Finance, and Housing

Today, there are approximately 18 million Americans who use some form of mobile digital cash or banking services – a 50% increase since 2009.  What is more, nearly 60% of the retail population wants mobile cash, credit card replacement, shopper programs, and of course, bill paying. 

Similar to the ideas behind TSA mobile check-ins at the airport, consumers could use two-factor identification (i.e., a secured, mobile device and something unique to the user such as a fingerprint or code),to not only purchase goods, but to pay taxes, send confidential information, and even shop for and purchase a home.  As consumers continue to frustrate traditional behavior models, the use of mobility devices and applications, even during tough economic times, is becoming the “new normal.”

Today, there are nearly 1 billion mobile users who do not have any consistent retail banking services – an untapped, minimum equivalent of nearly $10 billion in top line revenue.  Those trends are expected to increase another 70% in just 24 months.  The business case that was once singularly focused on areas of “nice” or “elastic” are now evaluated against bespoke solutions of “concrete” and “regulatory” (see May 2010, MBA NewsLink, “In Times of Renewal, Everything has Value – Not Everyone Sees It”).

For homeowners increasingly burdened and frequently aloof, the internalization of mobile services within their daily lives continues to witness an expansion in services, functionality, and features.  The result is that promising mobile offerings are not only being delivered for origination, but new functionality is being planned for servicing and securitization tapping into atypical behaviors in effort to create profits and stickiness within consumer classes.

For the enterprise, the introduction of robust tablets provides new mobility and features for capital markets, exchanges, clearing, and even settlements.  These new mobile channels may offer new integrity and differentiation to financial products and the investors who fund them. 

As mobility’s capabilities expand, banks will increase their householding, cross-selling, and recovery of troubled assets, while decreasing their costs for customer services (e.g., VRU’s, ATM’s), product sales, and marketing. 

Whereas consumers will sacrifice their landlines, homes, and even communities, they have a growing and permanent attachment to their mobile solutions.  Yet, mobility is not all good news as the markets rebalance and seek a new bottom – a double bottom.  What are the risks and immaturities surrounding mobility?

Downside Risks

Mobile challenges remain and are increasing in sophistication.  By 2012, over 60% of all mobility applications will be dependent upon data from a remote server somewhere in the cloud.  However, with the widespread use of data come challenges with security, privacy, and even countermeasures (e.g., network, device, and remote destruction of data while a device is powered off).

Additionally, whereas many groups will focus singularly on the “i-like” devices, the growing market power resides within the commonality of their operating systems resulting in a race to dominance among the four largest tablet and smart phone players – Apple, Google, Microsoft, and Nokia.  The wildcard vendor that is the most common for the enterprise is BlackBerry – for numerous reasons not the least of which includes a perception of “trailing” innovation within the expanding space. 

With the convergence of complex mobile operating systems, the common platforms criminals and hackers have been seeking are starting to arrive as the scale and volumes have reached a level that works in their favor. 

Already, there are 1,500 malware signatures for smart phones – a rapid increase in number and sophistication in the last 12 months. Within the last 30 days, there have been significant security flaws for mobile banking applications, including those operating with Android and iOS.  Correspondingly, it is astonishing that less than 10% have any credible protection for this growing base of malware, theft (financial, transaction, and identity), and information loss.

To make matters worse, IT departments are ill-prepared for dual use mobility (i.e., personal and corporate apps within a single mobile device).  With or without explicit permission, over 80% of mobile users are dual users and a majority of them behave within this operating model every day. 

As mobility grows, the “cat-and-mouse” game that transpired against rudimentary exposures is being replaced with determined and highly developed intrusions orchestrated by very skilled delinquents. 

* * * * * * * * *

The ability and underlying need to profit from the growing “i” devices has ostensibly arrived.  However, the approaches and techniques needed to exploit the evolution of mobility have not reached a maturity that provides for the non-repudiation or bullet-proof operating environment that must be present to secure sustainable consumer trust.  

As 2011 arrives, look for an expansion in the ancillary markets surrounding the devices and their common operating systems – new programming methods (QoD), testing and harnesses (QoS), data management, and security. 

What is more, processes and deployment will alter the value equation of mobile profits and underlying market expansions.  The “i’s” have framed the markets – but they represent only early generations in what will prove to be a longtail series of offerings across the mobility segments.

For finance and housing, first-movers will find initial success against a growing base of subscribers.  Yet, will the industry segments be willing to funnel investments from cash-generating legacy systems into embryonic mobile applications and a consumer base that they don’t understand?  How will it impact costs?  What are the profit models and transformations?  Where can an organization turn for answers?

Whatever you believe, it is never wise to ignore the markets – and its consumers.  Mobility has arrived for the masses across finance, banking, capital markets, and housing.

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Alliances – Confront Today for Success Tomorrow

Monday, October 18th, 2010

By Mark P. Dangelo

www.Innovative-Relevance.com

Increasingly, alliances and their dependent relationships are a critical component within our business and technology go-to-market offerings.  Alliances range from simple forms of operational provisioning (e.g., vendors, sales forces, expense management) to strategic relationships between firms (e.g., sharing of revenue, joint ventures, market collaboration) – and permutations of “everything in between”.  For some, alliances represent a new form of currency to expand capabilities, while improving margins.

Furthermore, regardless of organizational size, alliances are necessary modules in our delivery to customers (i.e., B2B, B2C, and P2P), and even as an element in influencing industry regulations and risk mitigation (e.g., associations).  Our organizational operations passively and actively use alliance relationships in both formalized and ad-hoc structures –beyond a logo on a web page or a press release advocating a spirit of cooperation. 

Today’s alliances are foundational building blocks used to connect highly-fragmented markets with bespoken offerings hemmed in by global economic and currency uncertainty (i.e., “Why hire when we can source to outside experts?”).

Yet, for all their potential, the on-going tit-for-tat saga being played out between Oracle and HP, exposes the deep seated vulnerabilities of traditional alliances and the approaches used to transform and govern them.  Whereas, most finance and mortgage group (FMG) operations are not as complex or interconnected as these billion dollar technology giants, their alliance deterioration demonstrates the downside consequences of assuming these relationships are risk-free. 

To discover alliance lessons learned, we need to pose five key questions:

·         What are the formal or informal alliance goals, objectives, and expected contributions? 

·         Beyond the legal documents, what does the alliance comprise – end-to-end? 

·         What is the impact – quantitatively and qualitatively — when they are non-performing? 

·         How have they changed from their inception and are they still relevant (i.e., how are they measured against today’s benchmarks)? 

·         What happens with the alliances, relationships, and businesses, which were built upon compromise, that end in bitter divorce?

As a financier and serial entrepreneur recently stated, “Today’s uncertainty and operating demands have put increased pressure on organizations to produce results regardless of the relationship consequences.  The result appears to be manifesting itself in unprofessional behavior, broken promises, and every man for themselves.  In general, old alliances are fast becoming inconvenient with a ‘buyer-beware’ position.” 

Indeed, it may be a good time to apply lessons learned to our own business and technology alliances – before they end up on the front pages or worse yet, in a court of law.  Let’s examine just a few of the unfolding challenges confronting today’s alliance initiatives.

Lesson #1: T-Squared (Timing and Trustworthiness)

 

For many, this is the most important aspect of their alliances.  Timing is not only important for payments, identifications, turnarounds, and resolutions; it demonstrates cross-organizational commitment and longevity.  Yet, the time required to reach an alliance (while simultaneously conducting joint pursuits) should not be left to chance.  Timing has become a known area where large firms negatively “string out” smaller ones.

 

Trustworthiness envelopes inter-organization actions, and once breeched, it will unravel the best alliance program.  In the publicized Oracle and HP alliance disconnects, both sides are now providing “evidence” and “allegations” that the other is behaving irrationally, and as a result, should not be trusted.  More commonly, during negotiations, organizations make-or-break the program by their actions – such as delaying contract T’s & C to avoid payouts.  An award for the poorest behavior is given to a large software firm that unilaterally substituted contracts in the middle of negotiations – after clients were introduced into the alliance program.

Lesson #2: DAR (Duration, Action, Reward)

 

A professional alliance should never be open ended.  Forced reevaluation on an annual basis is the norm subject to adherence to preset terms and conditions.  Businesses change – so does the need or desire for alliances.

 

Actions and interlinked responsibility / accountability should be clearly delineated encompassing priorities and budgets.  Most alliances stress the separation of IC, ownership, and competition, but few include Addendums detailing how any results are to be identified or achieved – tied to stated and agreed upon alliance goals, objectives, rationale, and implications.

 

Rewards or payments cannot be, “… at the sole discretion of the company” as some firms would advocate in the fine print.  Accounting for results is often more involved than an introduction, a referral, or part of a pursuit team.  The percentage, method, and duration of payments are always subject to negotiations and are seldom presented at face value.

Lesson #3: MCP (Measurement, Commitment, Performance)

 

To be rewarded, alliance programs need to have adaptive, measurement processes to ensure on-going relevancy.  Moreover, how profitability is calculated and expenses allocated are sometimes problematic. 

 

Whereas, alliance programs place a burden on the firm joining the plan, what commitment does the alliance provider guarantee should they fail to live up to obligatory performance?  Many programs are silent on this effort, but failure to deliver is a leading cause for reputational damages and early termination.  What about conflicts-of-interest?

 

So, how is performance measured?  Who owns the contacts and market?  If the alliance program is successful (in the eyes of both parties), what constitutes success?  It is more than payment terms. 

Lesson #4: PH (People and Herding)

 

As we know, alliances are often used to formalize a growing business relationship.  Frequently, when a key person leaves or is moved, the alliance suffers or fails altogether.  So ask yourself, is it a business alliance or a personal alliance?  The feasibility of alliances often begin with understanding this dynamic and the competitive forces in play.

 

Some organizations, especially when new products are announced, rush into the markets to sign everyone to an alliance program in an effort to gain breadth and scale – they herd as many as they can into promoting their offering.  Recently, we have witnessed increased alliances in services – outsourcing, consulting, and system integrators – as organizations want access to larger books-of-business, while they avoid hiring FTE’s and gain access to local markets.  Problems arise for smaller firms partnering with larger ones as these arrangements quickly become one-sided and commoditized – not to mention competitively dysfunctional.

Lesson #5: ICE (Issues, Challenges, and Expectations)

 

To ensure viability, any alliance must have predefined mechanisms to deal with issues or challenges to the intent.  Working relationships will generate frictions, and before they surface, agreed upon workout processes must be created and tested.  Without a process to escalate, your only choices are reaching out to the senior executives or hiring legal representation.

 

Expectation management is continually present in any alliance.  Is the partner holding up their promises?  Does the alliance hold hidden costs and risks that were masked?  How come the arrangement is not benefiting my organization sooner?  Dialogue channels and formalized communication must be explicitly identified in every alliance.  Too often, especially if executed with passive-aggressive cultures, communications and expectation fall into a chasm resulting in eventual alliance failure.

Lesson #6: SWOT (Strengths, Weaknesses, Opportunities, Threats)

 

SWOT is a common business approach for the initial definition of an alliance agreement.  However, the initial assessments are seldom revisited to ensure accuracy.  With the alliance underway, putting stated goals, objectives, and measurements into defined dashboards provides an “at a glance” assessment of progress and value.  Additionally, the results may lead to periodic appraisals of assumptions, risks, and issues forcing a revaluation of SWOT and the value of the alliance to the organization.

Lesson #7: BUIHTD (“Breaking Up Is Hard to Do”)

 

Even the best relationships can experience separation and some even end in divorce – at a minimum, the Oracle and HP arrangement is apparently heading for a separation.  Events, reorganizations, mergers, acquisitions, divestures (MAD) and even buy-outs can significantly alter once prosperous alliances.  Alliances, just like those forged in reality TV, are constantly shifting and breaking.  Forward-thinking preparation can mitigate many of the problems associated with BUIHTD.

 

Remember, alliance contracts should not resemble employment contracts – this is a surprise to many large software firms.  The breakup should not impact the ability to compete or forge new alliances — unless something is provided in return.

 

* * * * * * * *

There is a marked difference in alliances executed during periods of economic expansion versus contraction.  The changes for economic rebalancing, which precipitated the start of new alliances, have just begun – currencies, trade, policies, quantitative easing, MAD, protectionism, and regulatory taxes and controls.  Therefore, the traditional beliefs behind alliances must be continually called into question.  Alliances, and the proposed value brought to the organization, must be rethought.

Confronting alliance dogma represents a key component in creating and sustaining new business, while forging lasting relationships that mutually benefit both parties.  How effective are your alliances when you map them to the future of your business – and customer needs?

 

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The Changing Faces of Mobility and the Internet

Monday, August 16th, 2010

By Mark P. Dangelo

www.Innovative-Relevance.com

Mobile computing, and in particular mobile banking, has moved beyond the traditional laptop.  The idea of mobile “wallet share” is no longer just about micro transactions tied to mobile money (e.g., Clear2Pay, PingPing, Square, Bump) , but a complete experience that reduces consumer churn, while increasing financial product cross-selling and up-selling.  Reinforcing a need to uniquely engage a consumer, Adobe states that 1 in 7 FSI consumers change banks every year — yet “loyal” consumers purchase 40% more products and services.

Following market trends, the utilization of mobile technology by bankers and servicers seeking to reach consumers will continue to prove instrumental.  These trends are not just for workouts and delinquencies, but for attracting those homeowners that possess outstanding credit.  For agents and officers, advanced mobile apps will provide not only GPS paths, but criteria to navigate listings, find loan specialists, populate documents, and even perform virtual tours all securely and neatly fitting within ones palm. 

Mobile advancements today draw parallels to the technology evolution of personal computing which began 27 years ago.  This next decade will provide a unique opportunity to take advantage of changing behaviors and homeowner capabilities.  Let’s look at just three of the trends that are already impacting the wide spectrum of mortgage capabilities in a growing mobile world:

·         Private Clouds and Net Neutrality

·         Smart Devices

·         Privacy, Security, and Countermeasures

Private Clouds and Net Neutrality

It was just six years ago, the standards, domain names, and most of the network infrastructures were dominated by American firms.  The debate over net neutrality was a frequent topic of media attention.  However, as information quickly grew and offshore revenues expanded (along with international investors), the influence of a single nation to dictate a common vision began to wane. 

Today with the rapid expansion of cloud computing and their co-dependent networks, there are now private clouds being developed each with specific capabilities and business intent.  Examples of this includes, interconnected private-label trading networks, hardened FSI mobile computing for smart phones, and even architectures of mortgage clouds uniquely designed for consumers or investors. 

As specialization is being deployed across hardware, software, and networks, we are also witnessing challenges at a country level, which threatens to fragment the idea of the Internet into very specific country solutions.  The recent challenges and banning of BlackBerry communications is likely just the beginning of the potential objections forthcoming – they were a red herring for greater segregation. 

Even countries that rely on the Internet for national commerce (e.g., India) risk having their “agency” demands cascading into a fragmentation of the very innovation that allowed them to flourish.  Underneath the surface of the Google and Verizon net neutrality proposal recently introduced, we can clearly see the historic divisions rising up to create multiple nets – each with specialization, costs, and all distinguishing fixed from mobile.  The FCC’s future directions will influence the U.S. – but it speaks for a smaller and smaller slice of the mobile world.

In general, the ability of one network or Internet to fit the growing individualization of service and product offerings has likely reached its zenith (existing only in a “super highway” form).  Mobile will be segmented from fixed line and treated differently – it already is.  Bespoke networks of networks over the next 4 to 6 years will develop into the new norm as mobile devices become more powerful and increasingly secure — each tailored to a consumer profile, channel, or behavioral type. 

Smart Devices

Introduced early last decade, the term smart-phone has increasingly become a misnomer.  For all practical purposes, it refers to a growing class of sophisticated mobile computers (SMC’s) connected via robust 3G and 4G public networks that just so happen to have their origins in voice. 

For those vendors in the mortgage markets, these devices are forcing a rethinking of how and where to engage the consumer.  Now with hundreds of thousands of apps written for smart devices available, the certification of conformance to operate on a secure, private cloud will force a reexamination of device level protections. 

Examples of this will include, unique carve outs of memory protected by chipsets specifically dedicated to financial operations using ideas ported from “dark-op” efforts.  Furthermore, 2011 promises the introduction of several of these solutions embedded within commercially available software and hardware – PC and laptop chipsets starting in 2012.  Look for these solutions in FSI first.

With 20% of the U.S. population possessing smart devices, the ability to reach and retain these homeowners represents a chance to uniquely serve an educated and loyal consumer base.  When applied to reaching consumers about their loans or accounts, the SMC will be one of the items least likely to be parted with giving a unique opportunity to engage those needing assistance – especially with built in GPS. 

SMC applications will not be simply ported – but designed exclusively for these operating environments including, LOS’s, customer service, fraud solutions, validation (authentication, identification, and non-repudiation), and compliance. 

Privacy, Security, and Countermeasures

The poster firm for privacy concerns has globally become Google – as information contained within their vast databases raises alarms among opponents and especially from country regulators.

There are those of Orwellian convictions who believe Google has assembled digital dossiers on every person’s on-line actions – across the entire world spanning 2.5 billion individuals.  You can image the horror for homeowners or those seeking to repair credit, when it is learned they might have frequented sites about bankruptcy, defaulting on an upside-down loan, or even how to do a short-sale.

While many will rightly point out that secure mobile communications has to meet standards of performance and non-repudiation, the gaps of security (between a landline and wireless connection) are being closed.  In fact, a great deal of security innovations are now being targeted singularly towards the mobile consumer and mobile banking / FSI in particular.

Firms such as Tigers Lair are introducing solutions that deal not only with counter measure capabilities (even when a device is powered off rendering the unit cleansed), but also security across the entire spectrum of mobile operations.  Deploying a holistic approach, these next generation firms may be providing the mobile foundation not just for common retail banking, but for mobile BPO, compliance and assurance, and even as the primary system of record. 

* * * * * * *

Mobility has become part of the social mores for consumers.  As the consumer base increasingly values their SMC’s (just try and take an iPhone away from their user), the highly customizable devices provide the identity for many under the age of 45.  After a decade of experimentation, the building blocks are coming into place (e.g., see the latest announcements from Alcatel-Lucent).

The end result may be that to effectively select and manage viable homeowners in a post-crisis world, mobile holds one of the foundation stones needed for profitability and risk management.  However, what is certain is that it won’t be as many are envisioning – a singular homogeneous device or network that provides everything. 

Finally, with states looking to fill budget gaps, look for new taxes and surcharges on mobile and select applications.  I wonder, what new regulations will be proposed and how will they all be managed?  That is a battle for a future Congress.

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