Father's Day, and Digitization!

 
I hope everyone has a super Father's day.  I am sure most people would agree that their father had a major influence on their lives, and that holds true for myself as well.

 

I believe the single biggest issue facing any business today is how to incorporate digital information throughout the enterprise in order to best meet it's goals.  There are some critical insights to consider when thinking about the digital age.  First, all information is capable of being shared, quickly and easily, to massive numbers of people across a multiple spectrum of platforms.  Anything related to a product, or company (like a tweet, like, video, blog, web post or article) can be shared quickly and easily with a staggering number of possibilities.  As such, the amount of information which is being generated is exploding, almost exponentially so. 

 

In the very near future, even more data is going to be collected from an ever expanding number of items.  Cars, appliances, phones, tablets, phablets, small equipment, large equipment, medical devices, watches, and maybe even glasses will all be capable of collecting and sharing information.  You might think it will be very difficult to control all of this information, however, it will probably become even easier as your phone or tablet will be able to direct the functions of an entire household.  It is already taking place, and the shift will become more pronounced as time passes. 

 

With the recent revelations regarding government monitoring and data collection by the National Security Agency (NSA), industry will have to be far more diligent in protecting consumer data as privacy concerns are sure to become a hot button issue for the general population.  Certainly, the public needs to be protected, and first amendment liberties are still part of what makes our country different and unique.  Obviously, data security is going to be critical for any operation which is involved with collecting, organizing, analyzing, and trying to make use of the massive amounts of information which are being collected on a daily basis.

 

If you try to understand why the digital age is so critical for businesses, especially public ones, it starts with the simple ideas of trying to grow revenues, cash flows, and profits as quickly as possible.  Digital information makes it possible to expand into new markets, product lines, geographies, and potentially create new businesses in a much quicker period of time.  You can see this with events like flash sales, or an app which might get downloaded 100 million times (or more) in a year.  Companies take collected information, and use the data to spot trends for growth and create products which fit those growing patterns.  As an example, Amazon.com uses algorithms to make personalized suggestions to existing users for products they might be interested in.  The company currently does almost $65 billion a year in sales, and nearly 25%, or $16 billion, comes from those emails which say 'Hello Joe, you might be interested in this book.'  Obviously, the next level of this would go something like- 'Hey, Joe, your friend read this or used that product, so maybe you might want to give it a shot?'  Applications like Shopkick or Foursquare use location based monitoring to help attract customers, and many industries are developing unique uses for existing digital technologies as well.



The use of technology is also being applied across the most complex supply chains in nearly every industry you can imagine.  The uses for digitization are only beginning to be applied but you have to believe they will grow in imaginative ways for companies to become more efficient.  The challenge for all enterprises is to distill and analyze the available data into forms which are productive across all areas of a company.  By doing so, costs come down, and the power to make informed decisions is spread to users at levels all over an organization.  



The way I see it, though, the biggest area where digital technology can help businesses is in the ability to attract customers by using all of the different connected platforms to build an ever larger customer base.  As the user numbers grow, data is then sorted to personalize communication and further develop a focused relationship with people all across the various digital properties and devices.  The best companies in the world will continue to build their digital expertise and attract ever larger and larger numbers to their brands.

 Large technology companies are being forced to help the government with data collection- http://www.bloomberg.com/news/2013-06-14/u-s-agencies-said-to-swap-data-with-thousands-of-firms.html

Iran had elections yesterday and they elected a moderate hard line fundamentalist- if there is such a thing-

Stanley Druckenmiller is a heck of a money manager and thinks markets offer less advantage for him today than ever before-

Thank you for reading the blog post and I hope you have a happy and healthy Father's day and week!



Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charter holder.