Data to disrupt the value of durable goods

Information about hard goods is fast becoming more valuable than the hard good themselves

Every five years or so, giant IT consulting firm CSC (Computer Sciences Corp.) gathers its best thinkers to outline trends they believe will be "disruptive" -- what I like to call "game changers," technologies that reshape business.

The latest CSC report lists 10 game changers. Although I found some to be suffering from overexposure (e.g., "new media is breaking down traditional big media, giving voice to millions of individuals and unleashing new talent and creativity"), other disruptive technologies were less obvious (e.g., "researchers have already developed a molecular computer that uses enzymes to perform calculations from within the human body").

To get a better sense of the big picture behind these game-changing trends, I spoke with Paul Gustafson, director of CSC's Leading Edge Forum, and Alex Fuss, lead research at the Leading Edge Forum and author of the final report under discussion here, "Digital Disruptions."

Fuss has posted a video to YouTube to explain a bit more about the new age of the "networked information economy" -- a phrase, Fuss reminds us, that comes from Yochai Benkler's book The Wealth of Networks.

For CSC, there is a very practical side to this discussion. As Fuss points out, the idea behind the report is to "identify technology trends that will impact our business and the business of our clients so that we can leverage it to advantage." CSC is so practical, in fact, that it reported revenues of $16.5 billion last year.

As Fuss sees it, the world is moving from an "industrial information economy, where we had a layer of information that just was really on top of a hard-goods-based economy," to this networked information economy, where information has more value than the actual hard goods.

Watching Fuss' video, my skeptics antenna started to twitter, especially when he said, "We may still need cars and food and sneakers" -- yes, I thought, how else will I get to work, survive, and run the marathon? -- "but the information that is provided by those devices eclipses the hard goods themselves."

Now I had to call to see what in blazes he was talking about.

Gustafson took up the challenge. "Let's take sneakers," he said.

It seems Nike has a sneaker into which you can drop a GPS disk, and it sends data on your run -- such as speed and location -- to an armband or your iPhone or even a Web site that makes the data available over the Internet. A runner can share information and perhaps have others coach him. I'm sure there will be other sensors available that can tell the runner or coach how hard the runner's feet are hitting the ground or any other relevant data.

So, while there may be lots of sneakers out there (aka hard goods), it is the information that has more value, in lots of ways, from incremental service fees to building customer loyalty.

Fuss' answers, along with what Gustafson had to say, changed my mind. That's fine. I don't run the marathon anyway.

The real question is, why is this considered "disruptive"? Well, as both Fuss and Gustafson say, if in the 1920s your company had the best strategy among all of its competitors to make and deliver ice to all those owners of iceboxes, it was kind of pointless once technology gave us refrigerators.

In a sense, Nike's competitors either have to emulate it -- meaning the company won't be first to market -- or it can continue on a hard-goods strategy that places more value on the synthetic rubber the sneaker is made of.

Who do you think will be more successful?

Nowadays there are lots of cars, all of decent quality. But look at what is being added to differentiate one from another: Wi-Fi, and MP3 and DVD players. Car manufacturers, as the CEO of GM once said, are no longer in the automobile business. They are in the entertainment business. It just happens to also provide transportation, Gustafson says.

The information age has some very real-world ramifications. Those who can look into the future will succeed. Those who can't won't.

More on this report in a future column.

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