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What Happened In The Digital Economy In 2015?

Danielle Beurteaux

The digital economy continued to grow in 2015 — although some regions are experiencing a slowdown, while others, where the majority of the population doesn’t have access to the Internet, are playing catch-up. Here are 8 trends that affected digital growth in 2015.

1. Mobile is here

The next wave of the digital economy will be mobile. The countries that are fueling growth have heavy mobile users, and that will drive the digital economy in those areas.

2. Solving the problems of the world

The digital economy is helping to bring people out of poverty by providing access to things like commerce, banking, and communications, providing a digital infrastructure that most developing countries aren’t providing the old-fashioned way, with banks and telecommunications. It’s also enabling an easy and efficient knowledge stream between those with the skills and resources to help and those who need help.

3. E-commerce unicorn

E-commerce is growing everywhere, and Shopify is a small-business e-commerce platform that’s part of that growth. After filing its IPO last spring, the company sold 7.7 million shares and was valued at $1.27 billion. Unicorn status: official.

4. It’s changing jobs

According to recent research, the digital economy is creating jobs, growth, and wealth for some—and leaving others behind.

5. So many ways to pay…

Digital wallets, Bitcoin….so many new ways to pay became easier to use and more accessible. But 2015 wasn’t the year of mass adoption.

6. The “sharing economy” hit some roadbumps

Lawsuits and questions about the structure of the on-demand economy has led to a deeper discussion about workers’ rights, the future of work, and what and how much regulation the future economy needs.

7. Blocking the ad blockers

Ad blocking got a spotlight when Apple allowed ad blocking on its then-latest iOS release last fall. Some websites cried foul, pointing out the loss of ad revenue that keeps them afloat. One ad blocking app developer even pulled his best-selling product from the Apple store because it “didn’t feel good,” as he explained in a blog post.

8. Concerns about privacy

Hacking, data breaches, and questions about who is gathering what data and for what purpose brought questions about privacy into the spotlight. With Europe moving to strengthen privacy regulations, a landmark lawsuit, and surveys pointing to the increasing concerns about how personal information is used, privacy was a big topic in 2015.

Want more future-focused insights on the digital economy? See 6 Ways The Digital Economy Is Reshaping The Future Of Work.

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Three Factors Driving Business Agility

Anja Reschke

Why is business agility important in today’s digital era? Without it, you may be outwitted by swift new competitors that move into your industry. You might also risk becoming irrelevant, according to the SAP eBook, The Digital Economy: Reinventing the Business World.

Every sector is at risk of digital disruption, and you need to take action and adjust quickly in order to remain successful in today’s digital economy.

A group of consulting, technology, and business leaders from across the consumer goods spectrum addressed this issue at a recent forum. Their findings are outlined in the whitepaper, Rethinking the Value Chain: New Realities in Collaborative Business by Capgemini Consulting and The Consumer Goods Forum.

Three business agility influencers

The group determined that three key factors are significantly altering the business landscape and persuading companies to change the way they traditionally do business in order to become more agile:

  1. Consumers are changing. Consumer demands are increasing, and their omni-channel path-to-purchase is no longer linear. Their customer experience could involve a mobile app, web research, social media, an in-store visit, and an online purchase – in any order. They are also more influenced by online social networks than by conventional advertising methods, and they expect quick outcomes from responsive companies.
  1. Business is changing. Innovative business partnerships are becoming more important and technology is accelerating competition. There is an increasing threat from agile high-tech companies and start-ups that don’t follow established go-to-market patterns. Digital companies with completely new business models are gaining a competitive advantage as they boldly cross formerly well-established market boundaries.
  1. The world is changing. Global economics and demographics are shifting. Emerging markets are growing rapidly, with a different set of needs that agile companies are more capable of responding to quickly.

The biggest obstacle to business agility

The most challenging hurdle for business agility comes down to one thing: complexity.

Large organizations are so complex – with multiple layers, business units, legacy systems, and departmental silos – that agility seems almost impossible. But the ongoing pressures of the digital economy are forcing even the most complex global companies to become more agile just to stay competitive. What steps are you taking to make your company more agile?

For an in-depth look at how the digital era is affecting business, download the SAP eBook, The Digital Economy: Reinventing the Business World.

To learn more about the multiple factors driving digital transformation, download the SAP eBook, Digital Disruption: How Digital Technology is Transforming Our World.

Learn how digital technology is transforming the healthcare industry in the SAP eBook, Connected Care: The Digital Pulse of Global Healthcare.

Discover Five Things That Will Increase Your Business Agility.

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About Anja Reschke

Anja Reschke is the Senior Director of Strategic Ecosystem Marketing at SAP. She is responsible for the development of joint strategic marketing plans, programs, and activities, with global strategic services and technology partners.

How To Catch Up In The Digital Transformation Race

Paul Clark

It’s been said that every business is now a technology business, and if the competition is already forcing digital transformation in your industry, then it’s already too late for you to catch up.

I don’t buy that.

I don’t think it’s too late for any company to change course and succeed in today’s digital economy. New technology and innovative business models are cropping up everyday and changing the business landscape in multiple sectors, so there’s always something you can do about it. Indeed, a recent McKinsey article helps formulate some ways that incumbents can anticipate and deal with digital disruption.

The journey to business innovation

According to the SAP eBook, The Digital Economy: Reinventing the Business World, there are five main areas that organizations can focus on as they move toward digital transformation:

  1. Improve your customer experience. Innovate your products and services with a relentless customer-centric focus. Use streamlined messaging and a consistent approach through multiple customer touch points. You might also want to consider mobile customer engagement.
  1. Digitize your core business. Automate your processes with faster, simpler systems, and seamless integration between multiple areas of your business and value chain.
  1. Enhance your digital capabilities and create value from data. Focus on boosting your digital capabilities through advanced analytics, agile platforms, and continuous delivery. Consider a business model based on data, with digitally enhanced IoT products, and product-related services based on sensor data.
  1. Connect your workforce. Focus on training, attracting, and retaining employees and contractors with the high-tech skill set needed to support an innovative business model.
  1. Build your business network. Strengthen relationships with existing partners, and expand your digital ecosystem by working with innovative, and perhaps atypical but relevant organizations that could enhance your positioning.

Innovating in the digital era is not just about adopting new technologies. It is also about embracing a culture of innovation, encouraging collaboration, and tapping into digital ecosystems to achieve results well beyond the scope of an individual organization.

I don’t think it’s too late for any business to catch up. But you might want to be quick about it.

For an in-depth look at how the digital era is affecting business, download the SAP eBook, The Digital Economy: Reinventing The Business World.

Discover the multiple factors driving digital transformation in the SAP eBook, Digital Disruption: How Digital Technology is Transforming Our World.

Have you already gone through digital transformation in your business? Find out how to reinvent an entire industry.

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About Paul Clark

Paul Clark is the Senior Director of Technology Partner Marketing at SAP. He is responsible for developing and executing partner marketing strategies, activities, and programs in joint go-to-market plans with global technology partners. The goal is to increase opportunities, pipeline, and revenue through demand generation via SAP's global and local partner ecosystems.

How Much Will Digital Cannibalization Eat into Your Business?

Fawn Fitter

Former Cisco CEO John Chambers predicts that 40% of companies will crumble when they fail to complete a successful digital transformation.

These legacy companies may be trying to keep up with insurgent companies that are introducing disruptive technologies, but they’re being held back by the ease of doing business the way they always have – or by how vehemently their customers object to change.

Most organizations today know that they have to embrace innovation. The question is whether they can put a digital business model in place without damaging their existing business so badly that they don’t survive the transition. We gathered a panel of experts to discuss the fine line between disruption and destruction.

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qa_qIn 2011, when Netflix hiked prices and tried to split its streaming and DVD-bymail services, it lost 3.25% of its customer base and 75% of its market capitalization.²︐³ What can we learn from that?

Scott Anthony: That debacle shows that sometimes you can get ahead of your customers. The key is to manage things at the pace of the market, not at your internal speed. You need to know what your customers are looking for and what they’re willing to tolerate. Sometimes companies forget what their customers want and care about, and they try to push things on them before they’re ready.

R. “Ray” Wang: You need to be able to split your traditional business and your growth business so that you can focus on big shifts instead of moving the needle 2%. Netflix was responding to its customers – by deciding not to define its brand too narrowly.

qa_qDoes disruption always involve cannibalizing your own business?

Wang: You can’t design new experiences in existing systems. But you have to make sure you manage the revenue stream on the way down in the old business model while managing the growth of the new one.

Merijn Helle: Traditional brick-and-mortar stores are putting a lot of capital into digital initiatives that aren’t paying enough back yet in the form of online sales, and they’re cannibalizing their profits so they can deliver a single authentic experience. Customers don’t see channels, they see brands; and they want to interact with brands seamlessly in real time, regardless of channel or format.

Lars Bastian: In manufacturing, new technologies aren’t about disrupting your business model as much as they are about expanding it. Think about predictive maintenance, the ability to warn customers when the product they’ve purchased will need service. You’re not going to lose customers by introducing new processes. You have to add these digitized services to remain competitive.

qa_qIs cannibalizing your own business better or worse than losing market share to a more innovative competitor?

Michael Liebhold: You have to create that digital business and mandate it to grow. If you cannibalize the existing business, that’s just the price you have to pay.

Wang: Companies that cannibalize their own businesses are the ones that survive. If you don’t do it, someone else will. What we’re really talking about is “Why do you exist? Why does anyone want to buy from you?”

Anthony: I’m not sure that’s the right question. The fundamental question is what you’re using disruption to do. How do you use it to strengthen what you’re doing today, and what new things does it enable? I think you can get so consumed with all the changes that reconfigure what you’re doing today that you do only that. And if you do only that, your business becomes smaller, less significant, and less interesting.

qa_qSo how should companies think about smart disruption?

Anthony: Leaders have to reconfigure today and imagine tomorrow at the same time. It’s not either/or. Every disruptive threat has an equal, if not greater, opportunity. When disruption strikes, it’s a mistake only to feel the threat to your legacy business. It’s an opportunity to expand into a different marke.

SAP_Disruption_QA_images2400x1600_4Liebhold: It starts at the top. You can’t ask a CEO for an eight-figure budget to upgrade a cloud analytics system if the C-suite doesn’t understand the power of integrating data from across all the legacy systems. So the first task is to educate the senior team so it can approve the budgets.

Scott Underwood: Some of the most interesting questions are internal organizational questions, keeping people from feeling that their livelihoods are in danger or introducing ways to keep them engaged.

Leon Segal: Absolutely. If you want to enter a new market or introduce a new product, there’s a whole chain of stakeholders – including your own employees and the distribution chain. Their experiences are also new. Once you start looking for things that affect their experience, you can’t help doing it. You walk around the office and say, “That doesn’t look right, they don’t look happy. Maybe we should change that around.”

Fawn Fitter is a freelance writer specializing in business and technology. 

To learn more about how to disrupt your business without destroying it, read the in-depth report Digital Disruption: When to Cook the Golden Goose.

Download the PDF (1.2MB)

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Digitization Of The Supplier Network: Grinding Away Competitive Edges

Kai Goerlich

Competitors with advanced digital capabilities are invading markets with new disruptive business models – and a range of new challenges across all industries. Prices are falling and changing quickly. Margins are thinning. Resources are increasingly volatile while the balance between supply and fast-changing customer demands are next-to-impossible to match. All the while, 30% of industry leaders are at risk of being disrupted by 2018 by a digitally enabled competitor, according to IDC.

Under these conditions, companies are beginning to ask whether their supply networks should be open to the digital world. Will they accept the risk of being copied and losing competitive advantage? Or will they secure their best practices in supply chain and logistics?

Using an analytical framework of 15 ecosystem factors, we compared traditional companies against digital newcomers. Our ad hoc study revealed that digitization influences business systems on several levels, but standard best practices are not one of them.

Network resiliency

In most supply chains, the hierarchical model is still living and prospering. Digital newcomers usually create a web-like structure across the entire business. While the traditional approach may guarantee price stability and quality, this web structure allows a much faster ramp-up and exchange of partners – making it more resilient to change.

Dependencies

In traditional networks, the business is likely evolving around mutual advantages. Very often, there are tight, symbiotic business connections with limited sets of partners. New digital networks are operating with an increased focus on leveraging opportunities. Plus, partners are encouraged to participate, widen, and promote the network – even if they do not directly contribute to revenue or profit margins.

Brand management

Web structures are especially attractive to companies that find it difficult to access traditional value chains. In general, classic supply chains cannot keep up with the speed of change nor deal with new and unexpected supply-chain partners in future digital networks. And as “new and unexpected” translate into “interesting and exciting” for consumers, companies may encounter significant branding issues.

Path dependency

Digital newcomers usually have a lower path dependency, such as mode of action. Unfortunately, this can be attributed to perspectives and business plans that are not based on decades of experience in one business. Of course, knowing a business for many years has its advantages as well – but only if knowledge is successfully transferred into the digital world.

A new way to operate

As pointed out in an earlier blog, digitization is proven to be a shortcut for some traditional processes and functions. In turn, embedding best practices into supply-chain and logistics processes and avoiding any transfer of knowledge as long as possible may appear to be an obvious solution. However, according to our findings, it might not be the best path to dealing with changes related to digital transformation.

While digitization may indeed wash away former competitive advantages, it also empowers companies to use their vast knowledge and connections to get on par with digital newcomers – on a new and different level. For example, most traditional best practices are now outsourced and can be easily applied as a service. But more important, instead of waiting to be disrupted by digitization, businesses can become as flexible as possible to enhance the customer experience and build loyalty.

For more on disruption without damage, see 4 Ways to Digitally Disrupt Your Business Without Destroying It.

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Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Idea Director of Thought Leadership at SAP. His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation.