Is Digitalization The Silver Bullet For Business Growth?
We’re living in the age of Digital Darwinism, where the technology and society are evolving faster than consumer brands can naturally adapt. On a global scale, we have seen the rise of billion dollars valued tech unicorns across diverse industries namely accommodation, transportation, fashion, travel, insurance, finance and even food and groceries – the most basic commodity; in Asia-Pacific, technology sector took over a quarter of the pie, dominating in the 500 high growth companies list. The commonality being the digital capabilities to aggregate existing commodities to digital platform, and went blitzscaling to monopolize respective industries that have since impacted the way we transact in our daily lives.
According to Darwin’s theory, it is not the strongest species that survives, nor the most intelligent. It is the one that is most adaptable to change that survive. Digital Darwinism phenomenon had subsequently signaled both existing and upcoming ‘commodity producer’ to transform distribution model and started racing in the digital space too, but has digitalization really been the silver bullet to boost business growth?
Digitalization: The Enabler Or The Disruptor?
The most fundamental question to begin with, is how digitalization serve business’s purpose in the market – is digitalization a disruptor for existing market market, or an enabler for the existing demand? Disruptor, in marketing context is a disruptive innovation that creates a new market or disrupted the existing market. Back in the days there were no instant web search, borderless social interaction, nor on demand video streaming, all thanks to digitalization for being the firestarter for making these accessible at our fingertips. While we celebrate the rise of digital disruptors that have changed our lifestyle ever since, it is also worth mentioning the fall of these firestarters as well and recognize how the late comers dominated these market respectively.
- Search engine market: Archie was the first ever web search engine invented in 1990 to serve the searches demand over the internet, however Google later dominated this search market by adding the value of serving more accurate results with its qualitative scoring system.
- Social networking market: Six Degrees was the first ever social networking site since 1996 to connect social relationship over the internet, yet over the years Facebook took over the reins in this market by delivering better back-end infrastructure and open source integration for third party creators to complement the social network ecosystem.
- Video on demand market: iTV was first in the world that serve video on-demand in 1998 however fast forward 2 decades now Netflix has been a household name for video on demand service due to its various merits including excellent user experience and machine learning driven personalization.
Advertising budget redistribution through the past decade and beyond
When it comes to advertising channel, we have seen a paradigm shift in digitalization over the past decade as well. In the following 2 charts we will compare the contrast of compounded annual growth between overall advertising budget versus advertising budget on internet media.
Advertising spending in Asia Pacific from 2010 – 2022 (in billion USD)
The above chart shows in the past 10 years the overall Asia Pacific advertising spending compounded at 6.63% growth rate annually; whereas chart below shows the internet advertising spending compounded at 19.25% annually for the same decade from 2010 to 2019.
Digital purchase funnel 101: starts from awareness
Digital Darwinism: survival of the fittest
‘Survival of the fittest’ theory suggest it is the ability to adapt to the changing environment to survive or become obsolete, i.e. Nokia, Kodak, Blockbuster, to name a few. However, despite tremendous efforts and investments to adapt such evolution there are still examples that failed to achieve expected digital transformation goal. According to McKinsey’s report, there were 70% of $1.3 trillions digital transformations failed, estimated over $900 billions went to waste in 2018. What can we learn from these failures, notably GE, Ford and Procter & Gamle?
- General Electric: Rolled out massive scale of industrial IoT with the goal to leverage data to turn GE into a technology powerhouse, this 5-year transformation effort didn’t came to fruition just yet but the shareholders are expecting more on short term earnings.
- Ford: Built a new segment called ‘Ford Smart Mobility’ which is a digitally enabled car with enhanced mobility, however this business unit is isolated from the core business and faced quality concerns in the other areas of the company.
- Procter & Gamble: Aspired to be the world’s most technologically enabled company, however its broad goal led to broad initiatives that lacked purpose. Due to its market leader status the return on investment for a widespread and expensive digital transformation was insignificant.
In the cases of other companies, studies had attributed the failures to variable causes, namely the lack of clarity in digital transformation goal, siloed operation, lack of long term commitment for quality transformation, communication breakdown, lack of proper tracking system to measure progress, fail to adapt Agile company culture etc. It seems to have all the possible reasons to fail at digital transformation, but digital alone is not one.
Final thoughts: Digital Darwinism is part and parcel of mankind evolution
Instead of citing Digital Darwinism, which refer technology as the main drive for business growth, perhaps its time to take a step back and shift the perspective to realize that digitalization is merely part and parcel of mankind evolution, echoing Stanley H. Ambrose the anthropology professor that once professed:
Human biological and cultural evolution are closely linked to technological innovations. – Paleolithic Technology and Human Evolution
The earliest direct evidence of hominid technology dates to 2.5 Ma in the Ethiopian Rift Valley, and around the same time the first members of the Homo genus (of which humans are the latest evolution) began to appear. From prehistoric stone tool inventions, fast froward to 19th century when the computer was first invented, human has been the mastermind of technologies innovation to achieve efficiency at scale. Digital transformation essentially trickle down from the people of the organizations with the right mindset i.e. embrace innovations and challenge the status quo that could shape the culture across the board in aptly adopting technologies that would produce values to the market. Hence it became apparent that digitalization is not the silver bullet for business growth, without the people with the right mindset and culture to drive digital adoption.
What are your thoughts? Has digitalization bring any impact to your organization, and what are your challenge to see it come to fruition?