This blog is about the digital business era. The blog posts are brief, foods for thought. They comment on articles, events etc. with a personal touch.
The Digital Operating Model
Successful digital companies have operating models different from analog companies. These companies are operating at market conditions, but with a potential for high capital efficiency, which can make them darlings of investors.
Virtually all companies today use the digital channel as a vehicle for customer and consumer contact. The status check on “We’re online” would give a tick to most companies world-wide. And there are many great websites that attract consumers, manage relationships well, and make consumers want to re-visit again and again. The question is: What is the difference between an analog company with a stellar website, and a digital company? Why is the 2nd one more successful?
Purely digital companies are different
Purely digital companies often have operating models much different from analog companies. Their operating models are more social, asset-light, global, virtual and multi-sourced, than most analog companies. Their most valuable asset is relationships, next comes information. Goods and money are ranking below these two. These companies are operating at market prices, but with high capital efficiency. They have the potential of becoming darling shares of investors.
Their most valuable asset is relationships, next comes information.
Digital businesses have huge potential for industry disruption, as illustrated by the following e-tailer characteristics:
- Openly advertise all-inclusive, competitive prices and product availability.
Companies will face seismic shifts in business, caused by the proliferation of new tech, social mass media and disruptive digital ideas. Read what disruptions are and how enterprises suffer from or thrive on disruption.
The word disruption is frequently used in business contexts, but what does it really mean? We'll warm up on a few disruption examples in analog business, before moving on to digital disruptions.
Analog Business Disruptions
Industry sectors and society in general have gone through massive, abrupt transformations many times. The adaptation in practical life of steam technology, electricity, combustion engines, telegraph, telephone, radio, TV, electrical appliances, airplanes, cell phone technology, and many others have fundamentally changed the competitive landscape of everything. Companies that were once great have ceased just a couple of decades later.
Such transformations are called disruptive when most companies in a sector can’t handle it: Technology innovation in Japan almost led to extinction of the Swiss watch industry. Globalization led to super chains like Walmart, Tesco, Carrefour to extend world-wide. Process optimization and innovation based on Kanban, SixSigma and Lean lead to huge successes in the Japanese automotive industry. Outsourcing led to significantly reduced cost in manufacturing everywhere. Reorganization and operations harmonization using common ERP systems led to higher efficiency. And off-shoring led to use of low cost
Internet Shares on Steroids?
After the financial crisis in 2008, the money printers have been running 24x7 to secure a finance galore at affordable prices. While the economies are floating in cash, there are few attractive places to invest except the stock market. As a result, the share indexes are now generally higher than in the former “crazy days”. All shares are essentially on vitamins, but some shares are on steroids, and that’s the internet shares. Many people expects a market correction.
The digital industry is generally an attractive place to invest. It is illustrated by the following ballpark chart comparing the NASDAQ (Computing Companies) Index performance against the SP500 Index:
This is a 20 year story of stellar investment performance of the computing industry against industry average. It’s almost always better, sometimes with a factor of 2-4.
The introduction of web-commerce in the late 1990’ties led to a giant bubble of inflated expectations, with the NASDAQ (Comp) rising from 360 in 1995 to 2700 just 5 years later. It encouraged professional investors to pour thick streams of venture capital into web business ventures. In this feeding frenzy, everybody talked about burn rates as a way of illustrating how much money was dumped in the internet startups. The bubble burst in July 2000 and started a land-slide, leaving the majority of professional investors in the “trough” with a “once-burned, twice-shy” attitude to digital business.
The Digital Business Hall of Fame
Introducing The Digital Business Hall of Fame
According to Rolling Stone, the Rock and Roll Hall of Fame will in 2015 include Lou Reed, Green Day, Stevie Ray Vaughan and Double Trouble, Joan Jett and the Blackhearts, Ringo Starr and many other great artists. Most of them were told way back by well-meaning people to “not quit their daytime job”. But they went all in, investing their entire future in chords, lyrics, booze, love and dreams. And they made it.
Many people in digital startups quit their daytime jobs and go all in, too. Most go bust, but a few strike gold. A lot of people might be asking the same questions: What made the Rock Stars of Digital Business successful? What can we learn from their successes and mistakes? If there was a Hall of Fame for the Rock Stars of Digital Business –who should be mentioned there?
A Rock Star of Digital Business should have built a significant digital business, not "just" as an investor, but as a founder or key digital leader. It could be a one-hit wonder, or it could be a life-lasting sequel of evergreens.
This post will build a short list of founders/key digital leaders that have created fortunes in the current internet marketplace. The net worth is based on Forbes.com most recent estimates. There is no other ranking in this first edition. You are most welcome to suggest improvements to the Hall of Fame filter.
This is the 1st edition of the unofficial Digital Business Hall of Fame 2015. The nominees are:
The Rock Stars of Digital Business
The "digital era" that dawned upon us all in the beginning of the millennium, has gone through significant phases of development, and web commerce economy is now in full blossom.
Some of the rock stars of the first web-commerce wave are well known: Jack Ma, Mark Zuckerberg, Jeff Bezos, Larry Page. Their companies shot up and shook down strong and profitable industries, making dollar billionaires of their owners in the process. They base their business success on the emergence of massively large social communities on the internet which are nurtured and regulated by their businesses. The social media based web-commerce has become a profitable digital business. And they are successful digital leaders.
It’s quite evident that digital business cannot be ignored by companies any more. First and foremost the business models of all industries are turning digital. If companies can’t lead or even catch up, they will vanish. Analog businesses and strategies will become “investor repellants” of the future. And toe-dipping into the pool of digital business won’t fool the seasoned investor. The business executives that successfully lead companies into the digital business era, will be the rock stars of digital business.
My prediction is that in the near future, big value creation opportunities will accelerate away from the current, well-established web-commerce space, into something new. Venture capital will plunge into new opportunities based on technologies like
Digital Futures - The Internet Accelerates Again
In 1998 the first wave of web-commerce boomed in what has later been known as “the internet bubble”. The expectations were highly inflated and when the shake-down hit the web-commerce space in 2001, expectations plummeted, leaving a vacuum in the professional investors’ space that nobody wanted to fill. Both movements were extreme and a reaction to internet illiteracy and lack of experience. But looking back at the past 20 years of web-commerce explosion, the sum of developments is far more extreme than most people imagined in those times.
It is happening again, this time much faster, deeper and harder. With the exponential acceleration and the emergence of highly commoditized and useful technologies, the internet is once again sending seismic shifts through major industries.
Digital Futures shape Digital Strategies. Executives use Digital Futures to prepare their enterprises on the coming digital wave of competitive battles.
Many interesting digital futures are within the event horizon. While seemingly small and uninteresting, they possess gravity so strong that no industry sector will escape. They risk being ignored in most business strategies until it is too late. Enterprises that don’t follow Digital Futures risk missing the potential advantages of well-timed adoption of digital business opportunities.
The digital futures trends each contribute to the digital revolution by enabling sensors and controllers to monitor and manage our infrastructur
The Five Digital Competencies of the Board
The Name of the Game is Digital Transformation. It is a phase-shift in the way companies do business. Most industry sectors are either in the middle of this, or on the brink of it. Businesses in all industry sectors will be challenged on their business practices. The ones that can turn this into a growth opportunity gets richer and greater. The rest will perish!
Many Executive Boards have limited experience with and indepth understanding of the digital business models, and struggle to get a firm grip on the business models, competency requirements, risk and investments. The requirements to the Board of Directors is to master the following 5 digital competencies:
- Sparring with the owners regarding the company's long term diigtal development. This is called "the digital dream".
- Set direction for digital strategies and transformation plans of the company.
- Stay close to execution of digital strategies and transformations.
- To understand risk management and security management and conduct timely corrective actions
- To master the Board's own digital toolbox for enhanced productivity and convenience
Each of these competencies will be investigated and described in the coming article, The Digital Chairman.
The Digital Innovator
This is the digital business era. This is the decade where even companies with conservative technology adoption will reluctantly internalize that they must transform – or perish.
Throughout the past 2 decades, many industry sectors have transformed fundamentally once or even twice. Some industries have lost their existence while others have shot into the sky, making dollar billionaires of their founders in less than a decade.
A Digital Strategy is the combination of business and technology initiatives. To combine the two is making it stronger, more focused and more compelling – and it will help executives gain the necessary momentum to transform their enterprises.
This article is the executive summary of a coming book with the title “The Digital Innovator”. The Digital Innovator is an executive who bridges business and technology in a process of business development, investment portfolio management and strategy execution.
The book will target senior managers as a non-technical, practical and straight-forward recipe for success in Digital Strategies.
Business and technology strategies are some of the best described disciplines of the corporate environment. This section com-bines several disciplines to create a strong, focused and compelling set of strategic actions that will help progress your company towards its destiny. It gravitates around the following key topics:
- Identify the dream
- Decide to change
- Specify the gaps
- Connect the dots
Introduction to Digital Strategies
Digital Strategies - Serial innovators pair up with digital strategists and re-invent business across all industries. Setting up new businesses is easy and venture capital is available. Is it possible for top companies to follow these trends, or will they end up as the dinosaurs of the 20th century?
Introduction to Digital Consulting
Digital Consulting - The Digital Consultant is a global villager who fights for attention in a global marketplace that accelerates in transparency. Personal branding, personal relations and real, high-quality content is all that matters.
A key goal is to give you inspiration on how to deal with the digital business era. Another goal is to get feedback on ideas and thoughts. Have a great digital business era!
Confucius – you cannot open a book without learning something - /jan