Digital Flood

The aged are used to telling the young about history and rules, while the young warn the aged that there is a sea beyond the tribe. The rapid spread of digitalization over the past few years has not disrupted the most essential parts of what you understand in traditional strategy, but it has really opened the door to a new world.

Source: Freepik

1. Change the track quickly

The epidemic has hounded you and me in cafes, homes, and isolated office areas, while corporate offices are much deserted than before. Wave after wave of epidemics has accelerated the application of digital. Now epidemic prevention has become the norm and the world has quietly changed. Does the winner-take-all principle come back?

2. Digital advantages

The advantages of digital are not only seen in the super giant digital native technology companies, we can also look at the companies with successful digital transformation that are not digital native, such as Goldman Sachs, Disney, etc. Disney has invested heavily in its digital strategy and business model, and as the business expands and the snowball rolls, their spending on digital technology will continue to accelerate and outpace one competitor after another.

3. Rediscover the business value

Most of the senior executives of large corporations have realized that digital technology is a strategically critical competitive differentiation, with important implications not only for business model innovation, but also for productivity, cost excellence and other objectives.

Differentiation means incorporating software into the core of the business model and enabling direct interaction with the market.

In many cases, organizations seeking to differentiate themselves often need to go beyond traditional business boundaries and seek to build a digital ecosystem with connected service characteristics. Both traditional and technology companies are seeking to develop ecosystems across traditional industry boundaries.

For example, on the one hand, new entrants to the real estate market like ZPG in the UK, Zillow in the USA, and Shell in China are creating end-to-end ecosystems as traditional companies, including search services, home comparison services, mortgage shopping services, home moving services, phone and cable enterprise connectivity services, and home improvement professional services. On the other hand, technology companies like Kakao and Tencent (WeChat) are also moving beyond their original business scope to other businesses and building an all-domain digital ecosystem.

Source: Freepik

4. Differentiated digital investment strategies

During the epidemic, companies with better economic performance have common features, which are the emphasis on investment in talent/technology research and development/product development, and building new partnerships. They managed to leapfrog the crisis and come out on top, but many companies are still trudging through the mire.

One of the biggest changes in technology is the emergence of the economic phenomenon of building platforms, chasing after each other, and winner-take-all. These winners include both established mega-tech companies and fast-growing companies such as Zoom and Square. In addition, international winners (in terms of stock market performance) are continuing to scale up their investments in these technology platforms. However, for most companies, the desire to have a global-scale technology platform is a pie in the sky. Even if they are successful to get capital support and the board decides that they are willing to invest in digital and technology assets, the investment must be focused on enhancing differentiation and continuing to create value. For example, in the payments space, the large banks that have achieved a monopoly within their regions have now recognized the reality that the benefits of their investments in payments products and technology can no longer keep pace with global payments platforms such as PayPal and Alipay.

5. Strategic conflict

But don't be desperate, there is still a possibility for enterprises to shape the future software business model or technology platform key elements. Enterprises need to be more strategic in choosing where to deliver value and which are critical local economic and technological elements. The more important premise is that it is difficult for global technology players to replicate these technologies. Walmart, for example, operates the third largest online marketplace in the USA. Although it still lags behind some global players such as Amazon and eBay, he plays to his strengths.

Walmart's choice is to use its vast network of brick-and-mortar stores to create an offline platform for suppliers, helping them provide faster in-store pickup, returns and delivery support for customers, giving full play to the power of offline platforms to win business in ways that are difficult for online-based companies to cover.

Some regional companies are cooperating across industries and building key technology platforms together to resist the intrusion of multinational technology competition. Nordea Bank, for example, has worked with partners to create an instant payment platform to defend its share of regional consumer payments.

At the same time, regional companies can take advantage of a global-scale technology platform to compete. More and more enterprises are leveraging these platforms to build and deliver new software to support business model change by invoking world-class technology solutions through standardized, cloud-based third-party solutions. For example, cloud computing makes it unnecessary for SMEs to repeatedly invest in the construction of data centers.

Source: Freepik

6. Resource reallocation

The link between positive resource reallocation and value creation has long been well established in theory and practice.

COVID-19 forces companies to come up with work solutions that respond to major changes, such as remote work, cloud migration, or last-mile delivery. All of these need to be addressed quickly and dynamically resourced to support innovative change in days or weeks, rather than one to two years.

In many companies, responding effectively to the COVID-19 era will require reallocating capital and talent to the digital space. Even in the face of the temptation to reduce costs in other ways, don’t go down the path of being lazy and cheap. Behaviors like cutting budgets, cutting off entire business lines, and laying off a large number of employees in order to cut costs, which is actually starting a cycle of self-harm.

7. The key to digital transformation

Many companies were shocked by the rapid spread of digital technology and even took the center position of the industry during the epidemic, so they quickly move the digital transformation. But companies should also be cautious in the face of change, balancing digital opportunities with digital disruption and thoroughly reassessing the strategies.

As long as you treat digital as a means to an end and focus on how to reinvent your business, then you will find that the basic strategic principles still apply and the great initiatives that are proven to improve business performance still apply.