The process of digital transformation is leading to many companies not only evolving their business model but to initiating a wholesale change of industry focus, which might be referred to as a 'pivot', in industry 'buzz-word' terms.
Traditionally, digital was simply a channel for companies, whether B2B or B2C, to access or engage with their customer base in a more effective way. However, in more recent times, the process of digital transformation is leading to many companies not only evolving their business model, but to initiating a wholesale change of industry focus, which might be referred to as a 'pivot', in industry 'buzz-word' terms .
As such, the evolution we have seen in the B2C sector is fairly linear and predictable. We have seen businesses, or brands go on-line and massively scale up their availability, access new markets and geography, improve usability, create more loyalty and so forth. A good example would be e-commerce, a typical ‘app’ based service or perhaps e-wallet, all typically accessible not just through desktop, but at your finger-tips on your handset. Another impactful change at consumer level is how people now seek to access their media via OTT platforms on demand and we are seeing content providers pivot their business model towards digital solutions rather than standard subscription models via set top box.
With the B2B sector, the evolution is slightly less obvious, though the greatest example would be industry 4.0, leveraging technologies such as IOT, aligned to a host of stock technology stacks and architectures typically associated with the B2C sector such as big data, and even UI and UX for handset platforms to create highly useable products. This is often integrated, however, with more breakthrough technologies such as AI and ML to enhance automation standards. This is becoming increasingly prevalent in areas such as manufacturing, engineering, O&G and even agriculture. The potential of such solution is seemingly endless.
Where this gets interesting at a commercial level is that we are seeing companies create solutions for their own business ends that, once implemented and proven, they shrink-wrap or even white-label as solutions that they can sell on via various channels within their industry network as a completely new revenue stream. As such, solutions that are designed to optimize industrial process and create savings or increase productivity, then become a basis for companies pivoting their business model towards being 'product based'.
The ultimate pivot we are seeing, is within company types that tend to be asset rich in industries that may be considered ‘sun-set' sectors, such as Banking, Telecoms or Oil and Gas. For banking, the evolution is fairly obvious, as many institutions have hived off new sub-entities in fields such as payments and blockchain. However, we are now in an age where the large telcos are turning their backs on simply providing pre and post-paid mobile services and offering their existing customers solutions such as e-wallet; after all, such telcos are simply offering new services via the same platform, so they have the loyalty and trust angle covered. Taking this a stage further we have seen telco businesses venture into entirely new disruptive areas such as advertising . There is one such example of a major telco that has very successfully ventured into advertising solutions akin to programmatic, leveraging their existing expertise in customer data.
The most radical pivots we have seen recently are both in O&G. One such company has created a subsidiary e-wallet entity geared towards the bottom 40% of the economic spectrum. Futhermore, this company has launched an Eductech SAAS platform that will enable public schools in Malaysia to improve operational efficiency through a host of digital applications. The interesting angle with both products is the CSR dimension of helping with the digital accessibility agenda we see in Malaysia and many other countries. Beyond this we have seen one of the largest O&G companies in the region establish a core strategy based on becoming a retailer of choice, with all the associated digital add-ons around e-wallet and customer loyalty.
A defining feature is that many of these businesses seem to be looking at the balance sheet in very different terms when it comes to these new ventures. The BAU aspect of the business, whilst perceived to be in the ‘sun-set’ phase, is often already profitable and stable and is the basis for funding these new projects. The goal of these new ventures appears to be to build loyalty, customer data and digital through-put (rather than monthly or even annual profitability). The bigger goal seems to be future pivots that will enable future profitability and asset value. This is especially in the case of companies targeting the low income demographics in developing countries as, whilst the short-term goal may be good for society in terms of digital access for all, this investment in society could pay off considerably down the line as this very large segment of the population progresses economically. In other words, loyalty will pay off!
How this all pans out does appear to have elements of risk and a degree of commercial and even social experimentation in the mix, though the impact in terms of the job market, at least for the medium term, will be enormous growth in demand not only for hands on technical experts across the digital spectrum, but for leaders that can create a compelling vision for digital transformation. This vision needs to be translated to a road-map that convinces any existing board, more used to traditional business models, that the 3 year plan will create dividends and will offset eventual demise of traditional revenue streams. The journey to get there meantime should be very exciting and lead to many more creative pivots across a range of industrial sectors, both B2C and B2B.
How this all pans out does appear to have elements of risk and a degree of commercial and even social experimentation in the mix, though the impact in terms of the job market, at least for the medium term, will be enormous growth in demand not only for hands-on technical experts across the digital spectrum but for leaders that can create a compelling vision for digital transformation.