The Strategist

Uber Syndrome: How New Technologies are Killing Business


12/11/2015 - 14:43



Corporations are in danger. Any time, you may face a competitor with a very different business model, which will crush a sustainable business. Is it possible to avoid it?



Mark Warner via flickr
Mark Warner via flickr
IBM team annually conducts individual interviews with senior executives, including general managers, marketing directors, CFOs, CIOs. These investigations have been carried out since 2009, with purpose to track trends and factors, which, according to top management, affect the business development.
 
This year's IBM C-Suite study is the most representative. It was attended by a record 5.2 thousand C-level executives and representatives of both public and private organizations. What interesting trends they discovered?
 
Global "Uberization"
 
"Uber syndrome - this is when a competitor with a very different business model comes to the industry and crushes you," - says one of IT directors of a US large transport company. The "uberization" trend, or destabilization by appearance of a non-obvious competitor - the most common concern of CEOs around the world.
 
In just two years, percentage of top managers, who do not exclude the possibility of competition with companies from other industries, has increased by more than a quarter, up from 43% in 2013 to 54% in 2015.
 
The latest survey also showed that heads of global companies rely on the latest technology. For the first time, not only CEOs, but also other members of senior management are considering technology as a major factor in changing the game’s rules.
 
Digital giants and "small rodents"

 
The study found a curious fact. Today, competition often remains unnoticed until it's too late. It was initiated by the so-called digital invaders using a completely different business model. Typically, such companies’ target is a key part of the product’s value chain. They bypass current market players and seize control on customers, pushing other vendors aside.
 
There are two types of invaders: digital giants and "small rodents." Airbnb, Chinese Alibaba and Tencent are among the first. Such a giants need just a few accurate firepowers to destroy current market leaders.
 
On the other hand, "small rodents" are dangerous, too. They are not burdened with outdated infrastructure. Often, they do not have any infrastructure at all, as they use other people's assets. The banking sector is a typical example. Bank retail offices have always been a solid ground for the bankers. In contrary, "rodent" companies chose smartphones as the center of influence. Before, everyone who wanted to borrow money had to go to the bank. Now, there’s  Lending Club with its comfy online service. In addition, number of "small rodents" grows very quickly. 50 companies from the most disruptive global startups, composed by CNBC channel, together raised more than $ 22 billion of private investments.
 
Survival Tactics
 
One need to use different tacticst survive in the new competitive environment. Most executives predict change in the very nature of customer relationship management. They are particularly interested in creation of more and more digital and personalized consumer experience.
 
Leaders around the world also recognize the need to decentralize the decision-making process. They understand that the traditional control system cannot cope with small, nimble and unobvious competitors.
 
In addition, according to top management, combination of different technologies has the greatest potential in the new economy conditions. Cloud computing, mobile solutions and Internet will dominate the next three to five years. Yet, there’s a downside. In 2013, security issues have been only a small mark on the executives’ radar. Today, the majority (68% in the world) believe that IT security is the most important.
 
Businessmen-torchbearers
 
Analysis of the responses revealed a small group of companies, which differ from the other. Firstly, they have a solid reputation of the leading innovators. Secondly, they surpass industry peers in terms of revenue growth and profitability. We called such organizations torchbearers.
 
Torchbearers are best equipped to recognize and cope with attacks of digital Invaders, and are more likely to enter new markets. They adhere to three key principles of activity.
 
Scope: torchbearers are more farsighted and more confident when exploring opportunities in related industries. They decide where they want to play, while remaining as open as possible in the era of abrupt changes. They also realize that competition takes place within a larger ecosystem of interdependent players, which greatly increases their potential impact on the market.
 
Scale: torchbearers boldly invest in new technologies, characterized by higher risk and greater profitability, and become more aware of the need to maintain their competitive advantage and scale of experience. They have the maximum use of their best ideas, since they know that the biggest piece of the economic pie goes to only a handful of companies.
 
Speed: The torchbearers are more dynamic, more inclined to experiment and ready to perform the leading party. Having developed a new product, service or business model, they are rapidly moving towards the finish line, seeing the pace of technology development and the importances of class dominance in the market before competitors do it.

Original by Andrey Filatov, General Director for Business MidMarket and CIS Regions
 




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