An unstoppable combination of technological change and rapidly developing consumer demands and expectations are transforming the world economy. Boundaries separating traditional business and industry sectors are being washed away, and technology lets customers join forces with pioneering new types of firms to disrupt existing business models – from Uber to peer-to-peer lending.
This is the age of the digital platform, open round the clock and across the calendar for a new breed of consumer who expects near-instant service. Such platforms are found in all customer-facing operations, from financial services and healthcare to travel and tourism. Where will all these changes end? Expert opinion agrees that we need not despair. Far from it. A new era of collaboration and partnership is at hand as innovative businesses reach across traditional industry boundaries.
“More and more, we will no longer use the existing definitions of sectors,” says Michael Jacobides, Associate Professor of Strategy and Entrepreneurship at London Business School. “Instead, we will be asking what customers want to get from business and what are the products that will fulfil their needs?”
He adds: “What we see with the growth of these platforms is a greater customer-centricity – a sharper focus on caring about what customers want. This has the potential to deliver new value, but also creates fresh challenges. When you think about adding value, the company has not only to think, ‘What does the customer really want?’ but also, ‘How can I connect with other participants, other firms, linking them to my platform so that together we can create real value?’”
In place of the conventional sectors, says Professor Jacobides, will come ecosystems, formed by a number of digital platforms allowing complementary businesses to work together.
“Everyone is aware that the top businesses on the planet are firms that are based on platforms and which have built their own ecosystems. It is no accident that the five most valuable companies in the world measured by market capitalisation – Google, Amazon, Apple, Facebook and Microsoft – have made building and managing eco-systems a strategic priority, leveraging the energies and skills of complementary businesses.”
He adds: “Digital ecosystems allow us both to discover new needs and also to find new ways of connecting firms.”
The big winner will be the customer. The losers, he suggests, will be those business that continued to think in terms of conventional business sectors and failed to embrace the new collaborative spirit and to seek innovative ways of meeting new demands from customers.
But even those firms that accept that the future lies with digital platforms cannot guarantee that their particular platform will succeed. Given that there is bound to be a certain failure rate, he adds, consolidation is inevitable. “There are going to be fewer of them around and, there will be an increase in concentration,” he warns, adding that this would be matched by an increase in expectations from individuals.
This chimes with the view of Andrew Vaz, global chief innovation officer for Deloitte, the professional services firm: “In some spaces such as retail, the next frontier will be the consolidation of platforms. You can’t survive without it.”
But despite the inevitability of some casualties, the general direction of travel is clear, adds Mr Vaz. “Ecosystems and platforms are two critical levers in digital transformation. With a macro ecosystem you transcend sectors and industries as we know them today. For example, healthcare, banking and wealth management are increasingly being brought together under the umbrella of ‘health and wellness’.”
Dick Daniels, Chief Information Officer for Kaiser Permanente, the US healthcare provider, lists some of the most common customer demands in terms of digital functionality. “They want to be able to e-mail their doctor securely; to be able to look at their test results; to be able to refill prescriptions online, and to make appointments online.”
Nor is this the end of the story. “We are looking at what else can be digitised and what further developments we may undertake. Is there a partnership opportunity with Amazon on the logistics side, for example?”
Professor Jacobides agrees that healthcare is a prime example of the new digitally driven business patterns. “The confluence of remote diagnostics, data management and personalised tracking of drug use is opening up new realms of activity for those suffering from chronic ailments, acute conditions or even simply wishing to improve their state of health.”
Technological applications in this field range, he says, from car companies installing seats that monitor heart rate and pressure to the use of artificial intelligence to automate some tasks currently performed by doctors.
Financial services is similarly facing major disruption, opening, again, opportunities for new business models.
Sebastian Wedeniwski, chief technology strategist at the Standard Chartered banking group, says: “There has been a shift from physical banking to mobile applications. Do we still need banks and banking? We are bringing different services together and creating value propositions. It changes how we have to think and how we have to link.”
Professor Jacobides comments: “Banking, as we know it, may no longer necessarily be relevant. But financial intermediation in some form will continue to have relevance, and the question is how it will be best delivered to customers.”
Mr Wedeniwski adds that Standard Chartered collaborated with companies outside the group, but that such collaborations raised new issues for a prudential institution such as a bank: “We have to change how we think about compliance and risk because it will be a different world in the eco-system.”
Platforms are breaking down not only conventional business-sector boundaries, says Mr Vaz, but are also allowing for collaboration on non-commercial matters. “This is truly where we see new transformative thinking coming out from multiple players across all sectors,” he says.
“There are big societal issues, such as the integrity of news and the future of artificial intelligence. We are seeing a lot of organisations coming together to try to address them.”
Collaboration in tackling challenges both in business and in social affairs may be facilitated by technological advance, says Professor Jacobides, but, paradoxically, it will be human intuition and human skills in striking partnerships that will be the key to success in a fast-changing business landscape where old industry boundaries are up for grabs and traditional business models in flux.
“In a landscape that is rapidly being reconfigured, the need better to appreciate and leverage people becomes greater, not less,” he says. “Competition ceases to be primarily a matter of winning in your traditional sector, instead becoming a question of how you reshape your sector.”
As old sector boundaries fade, he adds, strategy, an essentially human skill, will be at a premium, as will the human ability to discern underlying customer needs. AI will automate repetitive and routine tasks, freeing both employers and employees to make full use of those qualities that spring from the essential nature of humans, such as creativity, initiative and flexibility.
Let us end with an intriguing thought from Professor Jacobides: “Could the growth of platforms and eco-systems be not the cause but the symptom? In other words, there is the opportunity of re-thinking stuff, of re-designing stuff. Technology and changes in regulation allows us to re-organise things, to think of new ways of putting things together.”
It’s time to seize this opportunity with both hands.
Michael G Jacobides holds the Sir Donald Gordon Chair of Entrepreneurship and Innovation at London Business School. This article is based on a panel discussion from the World Economic Forum’s Annual Meeting of the New Champions in Tianjin, China.
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