Smaller companies that focus on building ecosystems via joint ventures can upend larger digital rivals if they focus on analytics, automation and artificial intelligence (AI) advises Ray Wang, Chairman and Principal Analyst of Silicon Valley based Constellation Research Inc. and author of “Everybody Wants to Rule the World.”
Speaking at the State of the CIO event hosted by the CIO Council of South Florida, Wang, during a keynote presentation, told attendees the best way to compete against any digital giant is to create partnerships that collectively give an organization an advantage in terms of data supremacy. Otherwise, smaller companies will eventually find they have become too dependent on a larger entity to engage customers.
The ultimate winners and losers of what is now a seismic digital shift in the way organizations engage customers will be determined by the scope of the data-driven digital network any organization can create and maintain, added Wang.
Organizations are running out of time to build those networks, said Wang. Every vertical industry segment will soon be dominated by a duopoly as digital business transformation continues to drive waves of mergers and acquisitions. Organizations that fail to build meaningful digital networks that drive revenue via subscriptions to services are already falling by the wayside, he noted.
Regardless of how a service is monetized, Wang said it’s the data that organizations collect that will drive the levels of analytics, automation and AI that will be required.
Most organizations in the wake of the COVID-19 pandemic rushed to launch a range of digital business transformation initiatives. The challenge now is determining which of those efforts is going to have enough of an impact to enable an organization to compete effectively in the current digital business era. Organizations also need to assess both the digital capabilities of existing rivals and potential rivals in adjacent sectors that might leverage IT investments to expand into new market segments as barriers to entry continue to get lower in the age of digital business.
The pressure to deliver 50% or more return on investments has also become a primary reason so many organizations are now looking to expand via inorganic growth, noted Wang. Many of the companies that routinely made the Fortune 500 list have already disappeared, he added.
No one with certainty can say precisely what the future holds. However, organizations that make digital business investments today are much more likely to be able to successfully pivot tomorrow. The return on a digital investment today may not quite be as apparent as it might be tomorrow when suddenly faced with a new competitor that enjoys a closer relationship with an end customer.
Making the economic case for that investment may be difficult, but an organization that finds itself unable to respond to rapidly changing business conditions because it is overly dependent on legacy IT platforms is, like it or not, already a sitting duck. It’s not so much whether that business will be killed as much as it is how soon.