TechTour and the European Venture Capital Association held their annual TechTour Growth Forum in Geneva and Lausanne, Switzerland, on March 30-31, 2017.  This event brings together leading European, American, and Asian tech CEOs and investors for in-depth discussion of key business strategy topics.  Members of McKinsey’s Fast Growth Tech practice moderated several CEO-only roundtables at which CEOs were encouraged to share their experiences, problems, and best practices with each other in a setting without investors present.  Several key themes emerged about the direction of consumer-facing and Internet of Things (IoT)-based business models:

Consumer

The sheer variety of B2C business models makes it difficult to draw out common challenges, but a few themes emerged from the discussion.

• Managing online and offline journeys.  Several CEOs explored the challenges of integrating online and offline aspects of the retail business model.  An online retailer of home appliances, for example, was pondering an offline journey to complement the exclusively online journey that his customers currently engage.  Should he open flagship stores?  Recent American successes like Bonobos demonstrate how a physical retail presence can help boost online sales.  But one challenge with this approach was expressed by an online furniture retailer, who used online mobile only as an ordering mechanism, relying on leads from his chain of offline stores.  As a result, he was not positioned to grow fast as demand boomed.
• Big is beautiful?  Two CEOs of ride sharing and dispatch services debated the pros and cons of being part of a larger company.  One was working from within a large corporate; the other was growing his substantial business independently.  Working within a company has its benefits, but also brings significant struggles in the growth stage: how to secure the right level of funding and support from the parent company.  While independent operators lack this challenge, their financial stability on a day to day basis is more open to question.

IoT

The IoT workshop was filled with CEOs from across the increasingly diverse and complicated IoT landscape.  Some companies in this space are concerned solely with the technology stack—the various services and software products that enable IoT-based businesses, while others focused on providing services to consumers and businesses.

• Winner take all?  One question that emerged across the spectrum of IoT companies in attendance was whether IoT markets are prone to network effects.  While this world is plainly different from the traditional hardware and software companies that achieved great scale through vertical integration (e.g. Apple) or widespread adoption network effects (e.g. Microsoft), there was debate among the attendees about whether similar sources of competitive advantage could be found in the IoT ecosystem.  One possibility is a network effect that emerges from having the best data collection from connected hardware.  Another may arise from serving as a marketplace within the technology stack.
• Managing successful partnerships.  Partnerships are critical in the IoT space because whether you are a user of the technology stack or a provider within it, there are many pieces that have to come together to deliver a connected hardware experience to businesses or consumers.  Managing these relationships can be difficult—many CEOs expressed dissatisfaction at the time it took to locate good partners and then to manage the relationship moving forward.
• Trust is critical.  Data privacy issues loom large in connected hardware.  Several CEOs explained that sales depended critically on their ability to convince customers that their data was safe.  This will be a CEO-level issue for many years to come.