The Technical Divide

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Good Old Trend

This blog post has been brewing in my head for months, and I haven’t quite been able to pin it done completely until now. I’m holding a presentation on the subject at KTH on the 9th of April and I was hoping that your input could help me improve the idea and turn it into something really good and interesting to listen to.

In the mid-90s the Clinton Administration coined the phrase “the digital divide” as a way of describing the trouble that occurs between groups with access to computers and internet, and those that don’t. Although still a concerning issue, I think there is another interesting divide happening right now. And one that doesn’t pay attention to national boundaries.

I believe we are experiencing a technical divide. One that separates those with an understanding of software and technology from those who do not. This understanding will in many cases be the most influential factor in succeeding in business. And because of the disruption that technology causes to regular rules of business and marketing, it will come to affect considerably more people than might have been expected.

The German media mogul Hubert Burda summarized the development very well at DLD recently. He said:

“The problem with Europe is that we don’t understand that software is what is most important. People think that a website with 40 editors is better than 20 editors. And then Google comes and take over the world with an algorithm. Nobody in my business vicinity has written an interesting algorithm.”

Unfortunately, I’m pretty convinced that the rest of the world don’t understand that software is what’s most important either, apart from maybe places like Redmond, Bangalore or the Valley.

I’ll give two recent examples of this (please add more in the comments!):

1. Google Adsense
Adsense answers the question “what is the largest revolution within advertising in the last five years?”. And looking at my main clients, the media companies, which rely heavily on advertising for their income – I dare to say that not only have they failed to develop a sufficient equivalent to the technology, but most of the executives at these companies couldn’t even describe how Adsense works. And I don’t mean an accurate description of the algorithms, I’m talking about a simple walk through of how it works, and why.

Let’s go local to see how disruptive this piece of software really is. Take any local newspaper in Sweden today and imagine a board meeting a few years back. Google is on the move. I think the local execs thought something in the line of: “oh well, they won’t beat us on our own back yard at least. And if they even decide to come here, there will be loads of places that they’ll go to before our town”.

Now from a traditional point of view this is entirely correct. An American company will hardly prioritise a small Swedish town for it’s expansion. But that assumes that they have to choose and prioritise at all. Enter: software. Suddenly this foreign company offers local, contextual and result priced advertising. All over the world simultaneously. Without any sales people at all. No wonder the offer is good, and no wonder it’s difficult for the local paper to match it.

This is the disruption that software can cause. Therefore, anyone that considers themselves to be in the media business must, by default, also be in the tech business.

2. Spotify
Although not released yet, myself and many with me have been praising this Swedish startup purely from the beta test. In short, it is a streaming music service. Fair enough – there’s a few of them about. The thing about Spotify is the execution. It’s fast and it’s comprehensive. As a matter of fact, it’s faster than my iTunes which suddenly forces me to challenge the notion that is fought about daily regarding music and downloading. Why would I want to own my music, when it is perfectly satisfactory to just have access to it whenever I want?

One of the reasons for the brilliant execution of Spotify is technical innovation. It is possible to get high quality music through my broadband and be able to choose between thousands and thousands of tracks within seconds. As it is possible, and as it gives me such high musical satisfaction, it disrupts the regular business model that entails that music should be purchased in order to be owned and then accessed. Before this was the only way to have access to the music that you wanted to hear. Then came downloading which still was about owning the music, but not necessarily paying for it. Enter: software. Suddenly we don’t have to own the music to be able to access it.

Obvious for a lot of you out there, but still; anyone that considers themselves to be in the music business, must also be in the tech business.

The media and music industry are not isolated is this respect. They just happened, together with the film industry, to experience this technical divide before many others. I’m not saying that they are less clever, foreseeing or visionary than anyone else. But I am saying that the current divide will only increase, and that these industries need to rethink their focus dramatically in order to even stay in touch with what is going on. It’s not about sending your journalists to learn PHP – it’s about foresight and a reality check that says that no matter how little you want to be a company in the technology sector; you are. Deal with it. Understand it. And if you don’t want to develop anything yourself – you can acquire it. Open Calais from Reuters is a result of that strategy.

For me, I think banking is the next area to experience the technical divide. The major players are seeing the innovation within their field coming from tech startups – not from within the industry. And banking being a difficult area to enter as it may but I feel confident to say that there will be significant rumblings in this field within the next twelve months.

These were a few of my thoughts that I was hoping to turn into an interesting presentation. If you can add something to it I would be most grateful!

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