Tuesday, 19 May 2020 It is impossible to separate business and technology. Business models are and will always be linked with technological innovation.
THE ADVANCEMENT OF TECHNOLOGY IN CREATING NEW BUSINESS MODELS
Tuesday, 19 May 2020
It is impossible to separate business and technology. Business models are and will always be linked with technological innovation.
However, as businesses continue to operate in 2020, the start of a new decade that has seen leaps in technological innovation in the preceding decade, it is timely to ask an important question: Is technology creating new business models?
Many business heads know, to varying degrees, that business needs and employs technology in many, varied ways, but the ability of technology to deeply transform not just a business, but entire sectors and industries, is a subject we explore in depth.
There are two key challenges in any business -- how can the business create value, and subsequently, how can it sustain itself (be relevant, attractive to customers, and so on) in a fluid, and often unpredictable market -- how to avoid obsolescence.
Throw technology in the mix -- more so when the technology itself is evolving faster than businesses can keep up -- then the challenge becomes more pronounced.
To unpack this question and before we look into solutions, we need to delve into the basic premise of a business and look at the historical impact from basic technology thus far.
All businesses are built around this central premise -- the identification and creation of value.
In practical terms, a business is a system that solves numerous problems: identifying customers’ needs, engaging those customers’ needs, delivering satisfaction and - most importantly -- monetising that value.
While many start-up entrepreneurs may associate technology with the digitalisation of business (e.g. digital banks, online delivery services), the fact is that technology, even in its most basic iteration, can make or break a business.
This is the challenge then -- does technology help or hinder a business?
Think of the Polaroid camera, pioneered in the 20th century, with its ability to instantly print a photograph, in relation to its predecessor, the more traditional camera using photographic film rolls that one had to install into the camera and send to a shop for processing.
Fast-forward to 2020, an age of ubiquitous Instagramming and in-built smartphone cameras, tools that are deemed normal to a ‘millennial’ - a consumer born in 1995 (and some tech-savvy consumers in other demographics) but mention a Polaroid camera and the most likely response may be that it is a charming retro anachronism.
The most pronounced impact, however, was that the Kodak Eastman corporation, for years succeeding in meeting the demand for cameras that used photographic film, became obsolete with the popularity of the Polaroid.
The company no longer exists.
Finland’s mobile telephone giant Nokia, which had enjoyed sterling global success in the 1990s and in the first half of the Noughties, suffered a similar fate after the introduction of Apple’s first iPhone in 2007.
What, then, is the biggest challenge when technology disrupts business?
The increasing risk that your organisation will face obsolescence.
Meeting consumer demand is in itself a challenge.
Specifically, consumer demand funnelled into customers’ constant quest for convenience and instant gratification (i.e. satisfaction) have driven the pace of technological innovation to an extent.
Subsequently, the development of new, innovative technologies (to meet this consumer preference and change in attitudes) has given rise to new businesses that seem to inhabit characteristics seemingly different from ‘traditional’ businesses. For example, online businesses. (Online stockbroking services, online grocery suppliers, online travel booking sites, and so on.)
Consumers are becoming a well-informed lot, and with that comes the power to choose, and also, the power to drive change in businesses that no longer hold their attention.
To illustrate the point about consumer preference driving technological innovation which then causes business disruption, consider these sectors that have been deeply disrupted by technology -- newspapers, books, job search and recruitment, banks, retail, video rental stores, travel operators, and the music industry,.
While this is by no means an exhaustive list, it gives enough evidence to underscore technology’s disruptive nature on existing business models.
An additional challenge presents itself in the second form, where technology has reinvented the way business is done. Technology has enabled the creation of smaller, more agile competitors (e.g. online financial credit aggregators,) which compels existing businesses in that sector to rethink their policies and consider embracing technology in order to continue creating value.
The most prominent feature of these smaller, digitalised businesses is their ability to capture a large slice of the younger consumer market in shorter spans of time.
Business heads need to consider these key steps.
Firstly, taking stock of what customers and consumers want, what technologies work, and what technology your business needs in meeting consumer demand. Often, a thorough look at what analogue processes are costly or slow, is necessary.
Secondly, investing in diverse technologies such as cloud computing, artificial intelligence, robotics, automation, the Internet of Things or machine learning beyond the absolute basic necessities such as seamless, wireless connectivity and information and communication technology.
Equally imperative is for a business to engage a trusted partner to help your business manage your technological journey. While a CTO is crucial to the new business model, there are many facets of adopting technology into business operations that a CTO needs support for, from infrastructure, architecture to the all-important aspect of security.
Often, engaging a partner in the form of an organisation that is adept at meeting your business’ technological needs is a strategic move, as it allows you to focus your workforce and skilled workers to key productive areas.
Firstly, digitisation and digitalisation add speed, efficiency and innovation to businesses. (Digitisation is the process by which information is converted from its physical form into a digital form, while digitalisation uses this process to improve business competitiveness.)
Additionally, businesses need to consider the wider benefits. Reports from the World Economic Forum (WEF) support the view that technology helps businesses, helps the economy and benefits society. Technological innovation creates jobs, helps with education and learning, and even saves lives as technological advancements occur in healthcare.
Furthermore, consider the hungry market. With more than 800 million households in China, 500 million households in India, 110 million households in Japan and 80 million households in the United States and 80% of European households all having Internet access, technology represents the potential for the creation of value, not just for new business models, but also for physical businesses that have yet to upgrade their business with technology.
And in highlighting value creation or a slice of the pie, traditional businesses that fail to keep up with their technologically-able competitors stand to lose customers and revenue. In short, obsolescence.
A key example of technology having a positive impact in the creation of new business models can be seen in SMEs such as Eventbrite, in California, a startup that builds technology to allow people to manage and find events online as well as sell tickets online. The platform was launched in 2006 and by the time co-founders Julia and Kevin Hartz witnessed the company’s initial public offering in September 2018, the company raised USD230 million.
Another key example of a small business upending traditional business by building on tech is Kabbage, an online provider of small business loans, founded in 2009 and has been doing brisk business since, breaking a profit in 2015, and now providing loans to dozens of customers who laud Kabbage’s ease of tech-enabled processes that, with a traditional lending institution, might take three weeks to approval. This story demonstrates how the traditional perception of business being in brick and mortar form, is shifting, and the key to business sustainability is to focus on technology. A key take-away is also the opportunity to gather data about customers, leading to more opportunities to personalise the customer experience.
Noteworthy, too, is the creation and success of Kaodim, a business model that satisfies the on-demand aspect of consumer needs, enabled by technology. A service marketplace aggregator, Kaodim as a business demonstrates the opportunity to create a new business using technology, that fills a gap in the economy which existing players hadn’t considered. The creation of online service aggregators such as Kaodim gives credence to the idiom, you didn’t realise you needed a service like this until it came into existence. Kaodim, in connecting users to multiple service providers such as house repair and cleaning teams, for example, has simplified what a brick and mortar aggregator would likely take longer to achieve -- providing information in a borderless, online platform, using technology to gain the first-mover advantage.
Significantly, too, in creating value from tech-enabled business is knowing your customer better. One of the most startling features of tech-transformed businesses is the amount of data that is produced. According to the WEF, the world now produces 2.5 quintillion bytes a day, and 90% of all data has been produced in just the last two years. Data on the customer, on potential customers and even data that can influence your next business decision.
“[In] 2015, around 70 startups achieved valuations of USD1 billion or more. The rise of the unicorns has implications for analog incumbents, attacking traditional markets, thanks to the democratisation of technology, increased access to funds and a rising entrepreneurial culture.” - World Economic Forum report
Another World Economic Forum report says that 5G technology is expected to generate USD3.6 trillion by 2035, while a Statista report says that retail e-commerce (Amazon being the biggest retail e-commerce player) is expected to generate over USD700 billion in revenue by 2023.
In short, the creation of new business models that both embrace technology and are created with technology at the core of its operations, is a lucrative and profitable opportunity.
Talk to Celcom for how your business can be enhanced and transformed in its digital transformation and watch your business thrive in the growing, thriving digital economy.