Business digitalization: Tech companies as role models

In .Business Transformation, .Financial Services, Blogfest-en, Uncategorized by Baufest

Companies from a wide array of industries are adapting their culture and way of doing business to operate in a manner similar to “tech” firms.

Tuesday 29 - October - 2019
Baufest
Digitalización de negocios Las_empresas tech como modelos a seguir

The reason for this is very simple. These companies know that to survive and grow, they have to transition their businesses to being digitally driven and know it’s no longer an option to do that. Tech firms, who have driven the digitalization of business ahead of other verticals, have been major disruptors in every sector of the business world over the past several years.

What do we mean though, when we talk about “tech” companies?

Characteristics include:

√ A company based on modular, flexible, and independent platforms which organize their main business around data analysis, and advanced analytics.

√Companies whose primary technology allows you to move faster, with greater flexibility and on a larger scale than your competitors, giving greater ability to adapt and innovate

Digital Strategy

All of this may sound great, but the real question comes down to what is truly revolutionary about tech firms? They key point is that they transform and disrupt the means to interact with customers using cutting edge technologies. On another hand, they are also firms that use different business analytics solutions to predict scenarios, act proactively, and optimize market opportunities.

Digital business transformation

The area of digital business transformation also leads companies to become “mutant firms”, in the way they tend to enter into a business that’s not their main area of focus. These companies diversify in nearby areas, or areas adjacent to their main area of focus (where they share distribution channel resources, and well as technologies and brand equity); or even advance on sectors that imply a true break with their previous focus.

Reviewing the history of disruptions raised by tech firms, we can point to the first real disruption was in retail trade, where e-commerce companies (Amazon, e-Bay, Alibaba, etc) imposed their business model and its digital strategy into the heat of cultural changes derived from the omnipresence of the internet.

The second impact was in the financial sector, where “fintech” firms relied on technology to innovate and offer more agile and less bureaucratic applications, processes, and products in line with the demands of the new digitally minded generation. Several of these fintech firms are aimed at a young audience with a limited basket of services – primarily focused on alternative financing and payment services. But fintech companies weren’t the only ones: digital companies focused on areas other than finance also got into the finance game, including Amazon, Apple, Google, and Facebook who all developed payment services over the past several years.

Naturally, we cannot speak of a single business model that emerged from digitalization, but instead a concept aimed at satisfying customer demands and optimizing their experiences, both in terms of operational ease and cost improvement. This concept covers everything from the disruption of on demand chauffeurs via Uber to binge watching shows on Netflix. They are companies that work with their link to consumers directly and without intermediation. In some cases, as is the case with Netflix, they use artificial intelligence solutions to better know the customer which in turn allows them to customize the offer and become more accurate in the services that they offer. This also allows for a greater focus on the creation of quality digital content as well.

Business Digitization

The prospect indicates that by 2022 more than 50% of Latin America’s GDP will be digitized, with growth in each industry driven by digitally enhanced offers, operations, and relationships. By 2022, almost 70% of all IT spending will go to digital technologies and services (cloud computing, big data, social business, mobility, etc).

Within this framework, the digital business model may adopt different designs. One of them is the “peer to peer” model, which contacts two parties directly to carry out the transaction, with examples like AirBnB (which connects people who have available accommodation with others who are looking for them) and Uber (whose platform links vehicle owners with people who need transportation).

The subscription economy also gives rise to initiatives of another model – known as “freemium”, which advertise products or services for free as well as offering another “premium” variant to those who want higher quality content free of advertising (as is the case with Skype).

Naturally, traditional companies do not have to incorporate any of these models from technology firms. But if this wave is not capitalized on, those companies will run the risk of their business being “cannibalized” by technology minded companies with greater flexibility and ability to respond to what customers are looking for.