The Consumerization of Everything

June 27, 2013
by Thanasis Delistathis

Sometimes you have to take a step back to appreciate the frantic pace of change in consumer technology that we take for granted. The ipad didn’t exist before 2009, but it is basically the tool I know use to read all my magazines and newspapers. The iphone didn’t exist before 2007 but it is now the tool I use to make restaurant reservations, call for a car, listen to music, pay for parking, get directions, take and share pictures, listen to the radio, set my home security alarm, control the TV channels at home, buy things online or play games. It’s almost hard to imagine what it was like to not be able to do these things.

We often only realize how much has changed when we have to deal with industries where change takes place at a much slower pace. Compared to my iphone, my 4-year-old car’s navigation seems almost antiquated. That’s because it was probably updated 6 years ago. My kids’s parent school portal has an interface from the ‘90s. The electronic medical record systems at the hospital where she works feel even older, while she looks forward to the day when she can use an ipad to record patient information.

We believe that this is a critical inflection point in a number of industries. We expect consumers to play a larger role in accelerating innovation and possibly leading to business model disruption.

We currently invest in six primary markets: ad-tech, e-commerce, mobile, security, business of healthcare and education. We are observing dramatic changes in these markets and in almost all cases the consumer is at the center of all of them. All markets are becoming ‘consumerized.’

The change is a result of one or multiple of the following four forces at work: 1) Price pressures lead merchants to offer consumers tools to make decisions without relying on traditional industry players; 2) Consumers have easier access to more information and are trying to take advantage to reduce the price they pay; 3) Consumers are migrating to newer nimbler startups with better, easier-to-use technology putting pressure on incumbents to innovate; 4) Traditional merchants feeling the pinch in consumer demand are rushing to innovate to offer better products.

Here are some examples of what we see in three of the markets we target:

Healthcare: Employers are moving from defined benefit to defined contribution in an attempt to control costs. Thus, they offer consumers plans that give consumers more decision making and incentives to control costs (think more health savings account plans). A wholesale industry is slowly becoming a retail industry. Consumers will now need to either purchase insurance on their own in market exchanges or need tools to make more judicious use of the their health dollars (see announcement about our new investment, PokitDok, that aims to bring price transparency into the healthcare industry).

Education: Tuition costs have been rising at 3x the rate of inflation for 35 years, making college inaccessible to even high middle income families. Families are looking to make college more affordable by looking at all available choices (including starting at community colleges and then transferring to four year schools, an idea served by portfolio company Quad Learning (offering American Honors)). Technology makes the distribution of educational content more accessible through the internet, giving rise to online alternatives. Colleges are rushing to offer more online options in a bid to attract more students and reduce the cost of serving those students. New instructional methods arise. Massive Open Online Courses (MOOCs) are being offered by companies like Coursera and Udacity, thereby allowed a ‘fliped model’ of course instruction, where students come into the class having already attended the lecture online from a ‘star’ professor and ready to discuss the subject. Publishers rush to bring all their textbooks online. Tablets allow easy access to educational content, while adaptive learning companies like Knewton serve up materials tailored to the needs of each student.

Security: Threats have multiplied dramatically in the past few years, while at the same time the attack vectors used by the bad actors have changed commensurately. The traditional approach to cyber-security is to build a moat around the protected ‘fort’. That no longer works. For two reasons: 1) The bad guys are no longer attacking the ‘fort’; they are taking advantage of consumer behavior to walk in unnoticed; and 2) consumers carry access points around with them in the multitude of devices they use to access corporate information, including their personal devices. Spear-fishing attacks trick consumers or employees into taking an action online that allows the hackers to use that consumer’s identity to access protected systems. Signature-based virus protection no longer protects from malware attacks. Consumers now need to be at the forefront of cyber-security and companies need to educate them and provide tools (see portfolio company Invincea) to help them stave off the hackers. Consumers are also more conscious of issues privacy and the need for protection and they are looking for tools to help them.


Originally published at navfund.com.

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