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​What you can learn from startups

​What you can learn from startups

Digital guru, Steve Sammartino, on why big companies must learn from startups and the new players disrupting them.

Steve Sammartino: "The fringes are now coming into the frontline."

Steve Sammartino: "The fringes are now coming into the frontline."

The busiest art gallery in Melbourne is not the National Gallery of Victoria, but its alleyways that are filled with stencils and murals.

There are more international tourists every week coming to see street art, than Australia’s oldest public art gallery, observes Steve Sammartino, digital disruption guru and author of The Great Fragmentation.

“The fringes are now coming into the frontline,” he told attendees at the ANZ CIO Forum.

Sammartino relates a new generation of artists taking attention away from established museums, to nimble startups competing with big companies.

Moreover, the companies that were considered as disrupters a few years ago are now being disrupted. Think of Apple’s iTunes which had a seven year lead in streaming music and is now being unsettled by other services like Spotify and Pandora, he said.

“This is good news if you are a little behind in your company and can catch up ... It is time to catch up," said Sammartino.

But to do so, companies must let go of what he calls ‘factory thinking’.

This thinking is defined by the word ‘mass’ – the old world of mass distribution, mass retail and mass media, where there were barriers to entry. It was a circular world of consumers and manufacturers.

“If you had factories of production and you can afford mass media, you would win,” he said. There is a separate world of producers and consumers and never shall the two meet.

“You lived your life in boxes. You wake up in the morning, you hop into your box (train), or drive into your office box or factory box. You drive into a big box (retail), buy a box and if you work hard you get the corner box (office).”

“The good news is these boxes are dying,” he says.

The seeds of disruption have arrived and a digital layer is being put on top of these boxes, he said.

“There is no barrier to entry anymore.”

The transport industry, for instance, is being disrupted by Uber. Sammartino said while he feels sad for the taxi driver who spent thousands of dollars for taxi plates, the technology that made this happen does not care.

If you are starting today, what assets would you own, and which ones would you access?

Steve Sammartino

Meanwhile, consumers have their own power on their pockets.

“No computer in the world in 1985 had as much power as a smartphone,” he said.

Read more: NZ Racing Board signs 5-year IT outsourcing contract with Spark Digital

“This includes the NASA Univac computers that cost many millions of dollars or up to $3.3 billion in today’s money. The cost of technology is lower than ever, but often, companies forget culturally about this change. Decisions used to be centralised because the cost of it, and errors in businesses were so high.”

Today, the cost of being slow and centralised is much higher and it leads to disruption through nimbler competitors. This means that the average consumer or startup has as much power as a global corporation, he added.

He said this is not about technology but the possibility of marrying things up through technology, which is why startups are putting competitors out of business because they are connected.

So what do technology companies do differently?

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They think ‘ecosystem first’, said Sammartino. When Tesla offered the specifications of its electric car to a competitor, it was building an ecosystem – believing that the competition would be its customers because the manufacturer is so far ahead of the learning curve with the technology.

Startups consider assets as ‘optional’, said Sammartino.

“How many rooms does Airbnb have? Zero. Yet is ROI is 9 per cent compared to the Intercontinental Group, the world’s biggest hotel chain which has 670,000 rooms and has an ROI of 3 per cent, he said.

Startups are also not restricted by legacy infrastructure that puts many organisations in a ‘financial backpack’, he said.

Read more: ASB learns from tech companies with development of its cashless moneybox

“The new guys that come in do not have that constraint. The startup will launch anyway, even if their margins are smaller than yours because they do not have to own assets anymore. If you are starting today, what assets would you own, and which ones would you access?” he asked.

Startups also think differently about revenue sharing. YouTube partners, for instance, receive 30 per cent of all advertising revenue, he said.

Let go of the factory mindset

The new world is the age of the prosumer – half producer and half consumer, and the one thing that is not growing in this new world is attention, he said.

“Respect people’s attention; spamming social media with your brand is not the way to go. Speed to market is far more important than perfection.

“The factory mindset is perfection; I would rather have something in the market faster, then iterate, than have a perfect thing.”

His advice? Embrace the reality of the market you are in, don’t fight reality, he said before citing the crazy rise of ‘peer to peer’ lending, a trend that banks need to embrace.

Read more: Four best practices to kickstart advanced analytics: Gartner

The Internet of Things is another development to watch out for with Sammartino predicting that in five to ten years, the most high tech device in the home will be the toilet.

“It will be a mini laboratory which will measure and analyse everything you have eaten, because it is talking to your fridge. When you visit the doctor and state that you are eating the recommended fruits and vegetables, the [doctor] can respond with, ‘that is not what your toilet says’.

“If you think your privacy has not been invaded, you have not seen nothing yet,” he said.

He also called on business leaders to start thinking of other industries they did not care about because cross-fertilisation of industries is occurring in a data-driven world.

As well, he advises business leaders to get to know the world of startups by attending startup meetings.

He says he joins these meetings two or three times a week.

“The thing they want is business people, they want to make connections. So go to startup events,” he said.

Inside the organisation, fund the project of a ‘dissident’ employee who has pitched an idea of what you can do differently, he advised.

He said a lot of companies are starting similar “skunkworks”, where staff can split their work between the business and the startup project.

“That way, you got cross fertilisation of ideas, and if something turns out big, then you have a new business.”

Read more: Doing business with Fintan Diviney of Adaptive Insights

Send news tips and comments to divina_paredes@idg.co.nz

Follow Divina Paredes on Twitter: @divinap

Follow CIO New Zealand on Twitter:@cio_nz

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