CHAPTER 4:

I'M A CELEBRITY... GET ME OUT OF HERE!

The business landscape of the next decade is being rapidly reshaped by a new, very different set of rules. This transition will test the adaptability of all organisations, and swiftly. From an easy pasture on grasslands, we will move to the harrowing conditions of a hazardous jungle. Big or small, new or traditional, every organisation will need to adjust to the new terrain, new climate and different flora and fauna. Celebrity or not, we all need to adapt to the new conditions to survive and thrive.

This new business landscape will be brought about by the converging of several developing megatrends. In previous chapters, I introduced two of those: 'The Rise of Smart Agents' and 'Business Exponentiality', but these are only the beginning. In this chapter, let's explore the megatrends related to competition.  

The next wave of globalisation

Globalisation has been an intense force over the past few decades, creating great impacts on many countries. Liberalisation of global economic policy has opened borders, supply chains, and trade patterns, lifting an enormous percentage of the global population out of poverty. Annual world trade growth has averaged 6 per cent over the past 20 years. In the developing world, countries have enjoyed their first taste of economic prosperity, exporting to new markets thanks to injections of capital and technology.

We now participate in a worldwide market for companies and consumers, with access to global products and services. This forces companies to become more competitive, offering extra benefits for consumers. There is also a healthy exchange of information and collaboration between countries, with positive cultural intermingling. Flows of data across countries are 45 times higher than 10 years ago.

However, globalisation is not without its negative effects. Jobs in the west have transferred to lower cost countries; the multinational corporation is able to exploit tax havens and influence political decisions; and inequality has risen to disproportionate levels. Additionally, cybercrime now exploits the absence of cross border law enforcement jurisdictions to operate almost without restriction.

These negative effects, plus cultural intolerance, has provoked an upswing in populism, with Brexit and Trump among the most visible cases. Populism, however, will not stop the globalisation trend.

The 2019 World Economic Forum' Annual Meeting in Davos-Klosters will focus on “Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution”. Klaus Schwab, founder and Executive Chairman of the World Economic Forum expressed recently: “We are just at the beginning of Globalization 4.0, and are significantly underprepared for the magnitude of change we are facing. We are still approaching issues of globalization with an outdated mindset. Tinkering with our existing processes and institutions will not be enough. We need to redesign them so that we can capitalize on the abundance of new opportunities that await us, while also avoiding the kinds of disruptions that we are witnessing today”.

Vanishing industry boundaries

Slowly but surely, every industry is becoming your industry!

In industrial times past, the assets and knowledge of any given industry were unique. The boundaries were hard and well defined, creating high barriers to enter an industry.

Today, digital technology, information as a core asset and the power shift to the customer are melting away boundaries. In a converging world, all industry spaces will be disputed. 

In fact, once a company has their customer properly engaged through digital channels, the opportunities to deliver goods and services are endless.

Look at Amazon. From an online book retailer, it has become an overarching e-commerce marketplace – the largest in the world. It has moved to brick and mortar grocery shops enabled by innovative technology. It sells video streaming, music streaming and audiobook streaming. It has a publishing arm, Amazon Publishing, and film and television studio, Amazon Studios, and produces consumer electronics. Oh, and it is the world’s largest provider of cloud infrastructure services. 

Monopolising network effect

'Platforms' enable commercial exchanges between consumers and producers. Successful platforms tend to reduce significantly, or even remove, the transaction costs for consumers, and allow the product or services to be consumed on demand.

Many successful platforms leverage the 'network effect', a phenomenon in which an increased number of participants improves the value of the service. For example, if you have a telephone, but no one else does, the product/service is of no value. As more people join the telephone network, your telephone becomes more valuable.

I learned the power of network effect the hard way, early in my career. Charged with the responsibility for the technology of a big corporation in the late 1990s, I received an offer from Sun Microsystem to install, totally free of charge, the Star Office Software Suite for the whole company. I considered this an opportunity to save the vast Microsoft Office licence fees, and persuaded the organisation to migrate from Microsoft Office to Star Office Software. At the time, my organisation’s exchange of information with other organisations was not substantial, but even that little activity required compatibility with the Microsoft Office suite that all the others were using. Those few users requiring compatibility with the exterior, forced the required compatibility with the interior, making the migration process unsustainable. As a young professional, this was one of my most important lessons.

This effect is just as relevant for contemporary services: With Uber, as more drivers are available in more places, the service becomes more valuable for the consumer. As more consumers are seeking Uber rides in more places, the more attractive it becomes for the drivers. 

In the new age, digital technologies aid the multiplication of platforms. The rise of social media has helped to grow platforms, generating more interest from more participants. In all cases, the main obstacle is to get enough initial users, the critical mass, so that the network takes hold. Star Office never reached this critical mass (despite their successfully tempting a few frugal young professionals) and was therefore never able to break Microsoft’s monopoly.

Platforms that enjoy the network effect have high barriers to entry, with some of them having even higher defences. The highest barriers are seen in cases where our own community is already part of the network. If we currently use Uber, eBay or Amazon, and a new service appears with enough providers and better service, we wouldn’t hesitate to give it a go. However, if we use community-based services such as LinkedIn, Twitter or Facebook and all our communities operate there, it doesn’t matter if a better service, with plenty of other users, appears. If our own community is not part of the network, there is no point in migrating unless everyone else migrates as well, which is a rare and slow-burning occurrence.

I believe that every business model, in every industry, can be reconfigured as a network effect platform. If we add globalisation and vanishing industry boundaries, we might infer very quickly that the future will have only a few mammoth players, with everyone else being part of their ecosystem.

Consequence: the quest for extraordinary

The result of combining the previous trends may seem a bit distressing. With converging markets, industries and competition, the prospect of being merely average will disappear. In a world of too many options and too little time, the obvious choice for customers is to ignore the regular. And platforms will eat ordinary stuff for breakfast. The only chance for organisations is to become extraordinary in what they do. To deliver premium, consistent, frictionless, personalised, beautiful and inspiring experiences.

As marketing guru Seth Godin says in his book 'Purple Cow: Transform Your Business by Being Remarkable': "Quit or be exceptional. Average is for losers".

#FluidTransformation

#BusinessMegatrends

#Globalisation4.0

#FierceCompetition

#BeExtraordinary

Summary of Chapter 4

• In addition to the megatrends explored in previous posts, a few key trends are affecting competition.
• A new wave of globalisation, vanishing industry boundaries and the platform business model will reconfigure the competition landscape for everyone.
• It will be a time where either your organisation will be extraordinary or won’t survive.