Rumble in the Jungle
Pre-Digital Incumbent or Big Tech, who wins?
In one corner you have the Pre-Digital Incumbent who can still throw hay-makers that will put you on the canvas, but is slow and seems stuck on the ropes trying to survive yet another round. In the other corner, you have Big Tech, who also has the power to put you on the canvas, but is fast and agile, dancing all over the ring throwing lefts and rights. If bets are being taken then put your next pay check on Big Tech. I’ll keep you posted on the odds and note who’s wining compared with a decade ago.
The top 5 companies by market cap according to Wikipedia:
But does this mean you should give up on an old experienced fighter that many say is past their hay day? Well if you’ve watched any of the Rocky films then you’d know better.
Leaders of Pre-Digital Incumbents have realised that old business models are traps in this highly competitive digital age. On the other hand, Big Tech that is powered by software is booming. The reason is that software takes a linear business model and makes it non-linear, growth is exponential; think digital distribution, platforms and network effects. This is overlaid by beautifully designed interfaces and frictionless customer journeys. Also, their ability to capture more and more data enables Big Tech to continuously improve their products, which in turn attracts more clients. This virtuous cycle is very powerful.
Software takes a linear business model and makes it non-linear, growth is exponential.
What Big Tech has are two elements driving their business model — Systems of Engagement and Systems of Records. A new element has recently rocketed itself into the fray — Systems of Intelligence, which could be a powerful data analytics tool, some sort of AI (more recently machine learning), or a combination of both. The power of Systems of Intelligence is that it can span multiple data sets and multiple Systems of Records. It can take huge amounts of data and provide powerful insights and recommendations. Now the value proposition really starts to wind up.
The winning business model of the future integrates all three layers into one seamless package. That being said (and we’ve said this so many times), data will be the fuel for your economic engine. As we progress into the world of platforms, APIs, containers and micro services these interwoven and complex systems will inherently lead to the creation of powerful data sets as more people interact with one another (read more here). The data effect, is the underlying driver here, data begets data, which is closely coupled to the network effect. But it’s not just data from one single vertical. A System of Intelligence becomes truly intelligent when it is able to capture data across different verticals, different service lines, and different supply chains, as well as capturing contextual and environmental data, to drive insights like never before and help make powerful strategic decisions. For example, imagine a capability to help forecast company financials taking into account a complete data set and factoring this with risk adjusted external market data. Package all this up with beautiful user interfaces and frictionless user experiences and you have one tasty cocktail.So who wins? Well, right now Big Tech is winning. The companies that were considered the apex predators before the digital revolution have found themselves dethroned by tech companies that have the three layers we’ve talked about here and vast amounts of data, enabling customer centric products and innovative solutions that continue to evolve over time. As Pre-Digital Incumbents tip toe around the idea that a new business model is needed to survive in this day and age, they ossify their once dominant presence.
At this point in time we are starting to sound like a fanatical doomsday sayer. So let’s be clear, the old crew still have a fighting chance. Pre-Digital Incumbents have incredible networks and customer bases, access to old and new markets, deep pockets and great talent. But leveraging all this, and incorporating a System of Intelligence that can help make sense of all this data is their only chance for survival. That being said, if done properly, this foundation should actually act as an advantage. Insights garnered from mature networks, ecosystems and supply chains, coupled with domain expertise and highly skilled labour offers Pre-Digital Incumbents the opportunity to go toe-to-toe with Big Tech by offering highly bespoke solutions that mix digital and people together. Let’s not forget that business is still, and will continue to be a people game based on relationships, empathy and trust, so that human element is a strong draw card.
There are many Pre-Digital Incumbents that are attempting to become digital by on-selling digital products supplied by Big Tech companies, but the sad truth is that these businesses act as a proxy for Big Tech companies to further increase their footprint and data base. The real winners here are the companies that own the data, and have the technology and skills to leverage it. Those who used to sit at the top need to get with the program quickly because once the data starts rolling in you move onto the path of non-linear growth. There is still time for Pre-Digital Incumbents to make the move and keep their seat at the table. It’ll be no small feat, and many will not be able to make the transition, but the opportunity is still there, it just might call for a Rocky montage.
Co-authored by Anthony Stevens and Louis Strauss
