Romney Invokes Analytics in Rebuke of Trump

Gov. Mitt Romney, the 2012 GOP candidate and former Bain & Company executive, made an unprecedented move to rebuke 2016 GOP front-runner Mr. Donald Trump last week. The very public and personal rebuke set of shock waves in not only the GOP primary season but also rippled through news media and general conversations. Motivations aside (you can read that in numerous political blogs), what Gov. Romney did in suggesting a split in delegate count leading into the Cleveland GOP primary was to invoke painful lessons in analytics that caught Team Romney by surprise in 2012, which he would prefer to not repeat itself this election cycle.

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Gov. Romney learned a valuable lesson in analytics four years ago (photo: RightSpeak.com)

 

In the late stages of the 2012 election, Team Romney spent many weeks and precious campaign dollars in states like Pennsylvania where the campaigned believed there was still a chance and pathway to the White House.  Despite criticisms this week by Mr. Trump’s campaign that Gov. Romney “went on vacation” the last month of the election cycle, the truth is far from that.  Team Romney did not have the proper analytics and modeling to determine where to place the right bets the last weeks of the campaign (Virginia, Ohio, Florida, Colorado) and instead attempted to leverage emotions and outlying probabilities based on unscientific exit polls. Meanwhile Team Obama had most of the pathway to the White House calculated using advanced predictive analytics supported by Amazon Web Services.  The President essentially watched Team Romney (quietly) spend its limted precious resources in places where it would in the end make little difference and focus on late campaign stage positioning which led to Pres. Obama’s second term victory.

While watching from the sidelines in 2016, Gov. Romney’s insertion of political comment into the primary in a way is to right the mistakes made in his previous run in 2012.  Current pathways for Mr. Trump to achieve the needed delegate count in advance of the Cleveland GOP Convention get murky when each of the three remaining candidates divide up a number of critical states into their own delegate counts. In this model, Gov. Kasich and Sen. Rubio need to secure a number of states – including their own in Ohio and Florida, respectively – with Sen. Cruz continuing to pick off the heartland states, in order to block a quick pathway to the GOP nomination for Mr. Trump.  The  situation is so much clearer today based on advances in algorithms and the belief in the accuracy of predictive analytics, that few disputed Gov. Romney’s initial high level approach model, which many affiliate news organizations have analyzed and determined to be sound.

Regardles of the outcome of the 2016 GOP primary season, one thing is clear. Gov. Romney learned a very valuable lesson in the accuracy of predictive analytics four years ago.  And that memory is shaping his influence of the current primary season.

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Transforming Auto Makers to Connected Platform Makers

I love January.  As the saying goes, “New Year, New You.” And new cars. LOTS of new cars, announcements and demonstrations how the car will evolve with new features, content and systems.  This year the volley started early with huge announcements in week 1 at the Computer Electronics Show in Las Vegas and will continue in weeks 2 and 3 the Automotive News World Congress and North American International Auto Show in Detroit.

HP Matter Connected Cars Hero

Photo: Hewlett Packard

There are some megatrends emerging from the recent announcements and research SAP has conducted over the past six months and will progressively make available through its social channels over the course of 2016.  Economically, a number of impacts are at work. With the fall of crude oil prices and other commodities, and North American volumes hitting pre-recession levels of 17.5M units in the passenger vehicle segment, growth is expected to continue.  However it will be a different kind of growth based on the evolution of the value chain, as well as general expectancy that global AGR levels will taper from 7.8% (from 2009 to 2015) to 2.8% (from 2016 to 2020) according to IHS, and the retention length of vehicles rising to over 12 years on average.  OEM consolidation will likely follow in the next decade to help keep growth moderate and remove industry structural costs.

The “Future of the Car” is changing as well, from mostly mechanical and metal-based vehicles to a connected set of component platforms, plastics and next-generation materials essentially creating a rolling data center providing safety and entertainment going from Point A to Point B.  Social acceptance of a fully autonomous vehicle – and the regulatory environment supporting that – is likely 5-10 years out based on current forecasts (OESA, CAR).  However a connected vehicle – depending upon what your definition of “connected” is and what services that uses – is here today, both on the public highways and in prototype communities like M City.

What does all of this mean for SAP’s automotive OEM and supplier customers?  It means companies have significant choices in product design, value chain placement (and respective participation), and customer experience to define the organization for the next few years to come.  Last year I asked executives “are you buyers or sellers?” This year I am more apt to ask “are you a platform maker or owner?” as makers and innovation will rule the ability of OEMs and suppliers to not only have the profit to make acquisitions but also determine the position of the portfolio in the value chain where they will drive content.  And content is profit, and profit means growth. And growth means you survive and prosper in an ebbing business cycle.

Here are some disruptors coming out of this month’s automotive announcements.  As more become available during the month (or as forecasts change, which of course they will) I will update this post as appropriate.

  1. Technology is not the long pole in the tent. Regulatory needs to catch up.  The big data base technology to help manage petabytes (1,000 terabytes) of information including music, images, maps, consumer behavior is already here.  How we use these – based on location-based privacy and social norms – and what we are able to implement in products – based on regulations – have only partially been defined.  This is a real bummer to consumers and tech savvy developers, who essentially are releasing only parts of consumable disruption based on business environments.  Uber as an example has taken its disruptive model to court in a number of cities and states (and won).  Google has sent its driverless, autonomous vehicles to a number of cities with some relative success.  Until we are ready to give up control of our driving abilities? Not yet.  But in Michigan you can’t take a driver’s test at the Secretary of State office using a park assist vehicle to parallel park.  Again, we aren’t there yet.
  2. The notion of a vehicle platform and how it scales and connects has changed. Typically a vehicle has a number of trim packages, platform sizes, power plants and features. When a manufacturer builds to a variable platform, usually the platform itself is constant down an assembly line and the features and cosmetics adjust per spec of the vehicle.  Faraday Future announcement at CES of the FFZero1 platform for variant configuration, where the platform itself can stretch and modularly accommodate different power plant designs (e.g. battery pack stacking), has the potential to change how vehicles are designed at the platform level. Delphi emerged with its announcement of its vehicle to everything (V2E) platform also at CES allowing vehicles to sense devices, social behaviors and “things” is one example of automotive suppliers moving to “connected platform makers.” Other suppliers such as Bosch are developing their own platform to connect devices, components, homes and information.  And GM announced a major $500M investment partnership with Lyft to enable fleet connected B2C vehicles. Being able to scale physical and information platforms using big (very LARGE) data sets with consumers is a key to transformation success.
  3. The Aftermarket segment will collapse, and everyone wants a share. And for you to love them. The bidding war over Pep Boys is likely the first of many acquisition plays and direct to consumer moves by auto parts suppliers to converge its OE and aftermarket businesses.  With each stage of the aftermarket value chain adding a full price share of margin from one step to the next (usually 80-100% of margin per value chain step according to theAutomotive Aftermarket Supplier Association), it’s no wonder that auto parts makers want drivers to get their hands on their parts directly to harvest margin otherwise flowing through the more expensive OE dealer channels.  Will drivers who hold vehicles longer buy directly? Most do already through the likes of eBay, Amazon, NAPA and AutoZone to name just a few of the big players.  Often this competes with OE interests to leverage their own proprietary dealer networks. How suppliers go after this high margin space, and how they communicate brand interest and customer experience to drivers who normally buy through dealers and distributors will be key to success.

Platform makers OEMs as well as suppliers – will garner market share moving forward. Tesla, Google, Faraday, Bosch and Delphi (among others) have stated their interest and staked their claim as disruptors owning a platform.  Not necessarily as a classic car company.  Those companies unwilling to embark on a journey to digitize not only their product portfolio but their business operations and unleash new platform business models, will be relegated to “seller” status going into the 2020s.

Auto makers and suppliers need to stake their claim now based on these and other mega-trends to build their financial assets to continue growth throughout the balance of the decade and beyond.

This blog originally appeared on the SAP Community Network. Please follow me there (login required) or join the conversation on LinkedIn

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TEDxDetroit: Making Net-zero Beer

Today our blog is from the Fox Theater and the TEDxDetroit event.  Many innovations in the TEDx labs where in one station TEDx-ers and I learned how to make net-zero beer and get our x-training in.

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This Labor Day: The California Drought, Sustainable Water Use, and Changing Micro-climates

This Labor Day, The View from C-Level reflects on the California drought, sustainable water use, and a changing micro-climate.

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The Need for Planning to Run Simple

This past month at the SAP SAPPHIRE conference, the RUN SIMPLE message was out in full force. More customers are working hard to move onto the cloud-based, in-memory road map advocated by SAP as the world’s largest business software company. We often talk about the end game and the benefits achieved by simplifying operations and user experience.  We have a tendency to gloss over the deliberate, focused preparation required to get our customers on that journey map and lead them through what often is a multi-year transformation to cover all of their functions, processes and systems (and a merger integration here and there along the way).

As a writer I’m fond of the Nathaniel Hawthorne quote, “Easy reading is (damn) hard writing.” It came up in conversation today as I plan to roll-off a major customer program that has held most of my focus for the past nine months.  I’m not suggesting that moving to simple is hard … without careful and deliberate planning though it isn’t easy.  Working with partners it’s our job as transformation specialists to illustrate the “art of the possible” and to get customer teams to use an “outside in” lens to understand what process bureaucracies, poorly designed user experiences and other inhibitors to success that come with any integrated enterprise resource planning (ERP) environment.  Moving from legacy systems and spreadsheets to the hyper-speed of in-memory computing is revolutionary – even scary – to some customer groups.  Taking them through the journey of what is possible, what other customers are doing, what is SAP looking at downstream in its own road map – continually each and every quarter – is essential to operate in one cohesive team among customer, partners, software and services.

(Graphic by izquotes.)

As part of my recent effort with this customer, we partnered with a systems integrator and management consulting firm to define use cases and play books so that – much like players on the field – we could execute different activities understanding how various teams would operate and inter-operate as part of that execution.  It sounds easy, however in a large, complex global organization it takes time to socialize these ideas and arrive at a point of view that everyone can buy into and agree on.  Again that’s the (damn) hard writing part of easy reading or in this case execution.

It’s exciting for the journey ahead as we leverage the ever-changing world of technology, science and information. With excitement comes the responsibility for those of us on the front lines to ensure the proper communication, planning and education is provided to our customers for full visibility and understanding.

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Geo-politics and Analytics: UK Election Shows Continuing Divide

This week’s election in the UK will surely go down as one of the most poorly predicted elections in modern history. With the Conservatives securing a full majority as the results are tallied, pollsters and pundits were left scratching their heads over having forecast one of the closest elections in over 70 years and near possible constitutional crisis.

Prime Minister Cameron Baffled Pollsters, Capturing the Majority (Photo: BBC)

With advanced predictive analytics one would think that the world of geo-politics would be an easy use case for pollsters leveraging current technology.  Given this week’s misfire in the UK, it appears not much has changed since 2012 when the US election likewise had two very different forecasts with equal certainty.  One thing is certain: advanced predictive analytics can easily model weather patters, consumer behavior and even election outcomes based on sentiment and pattern analysis.  At least when properly leveraged.

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Business Networks, Disruption and Judo

This is a repost blog from my LinkedIn account. Follow my LinkedInfluence posts on that channel.

I like to use the expression “business judo” with my clients in situations where disruptive forces attack the seemingly mature strengths of a business model. Large and mature organization which miss a disruption cycle at best require deep modernization to right-track growth efforts, in the worst cases miss the opportunity altogether and either need to leap frog ahead through clever innovation or decline like the infamous “inflection point” espoused by former Intel CEO Andy Grove.

A classic case of business judo is unfolding right before our very eyes in the tech space. Large ERP companies are battling it out not over on-premesis software applications but over cloud applications and revenues. But is this the disruption? Or is there a judo move at work that is less visible to the naked eye?

SAP’s recent acquisition of Concur on the surface is a head-scratcher on many fronts. At a disclosed purchase price of approximately $8B it appears to be a big push into non-organic and cloud-based growth by the company. Indeed, even Forbes greeted the news with some skepticism and suggested over-evaluation which led to a near-term drop in SAP stock price. This puts SAP on pace to keep up with Oracle with anticipated public cloud revenues for current year at $2.3B and $2B, respectively. (Ibid) On paper this looks like a keep up with the Jones’es move to show cloud growth on par with its strongest ERP-based competitor.

However, if you look closely at other recent acquisitions and internal transformation from SAP you will see a larger story emerging around the business network. The concept of a business network suggests that the more participants in the network offering cloud-based services and products, the more revenues can be generated in a captured marketplace. Think of Amazon with its Amazon Prime business network of an estimated 20 million consumers. In a B2B environment – which eventually translates to B2C in the value chain – the business network rules.

In 2013 Ariba (the purchasing and online commerce network now owned by SAP)had over 1 million trading partners in over 190 countries. With additional acquisitions over the years of SuccessFactors (HR and talent management), Concur (expense management) and other organic cloud-based systems, SAP expects to grow its cloud subscriptions to 50 million from 38 million currently. These levels are on par with Amazon and while not publicly available one wonders if the recent IPO-buster Alibaba could claim such subscription levels even with a broad audience base in mainland China.

So go-on ERP companies. Keep thinking the play is to increase cloud-based revenue earnings. Meanwhile companies like SAP will continue to grow its business networks and show us just how well it knows a few business judo moves.

In full disclosure these are my own views and are not influenced by corporate information not available in the general public domain or containing and forward-looking statements. My publicly obtained sources are highlighted in this blog for reader review.

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