How can incumbents wield digital technologies to reshape business and society?
Throughout history, we have turned to technology to solve our hardest problems. From making knowledge more accessible to more people, and bringing more connectedness, to making travel safer, our planet cleaner and even saving lives, technology has made it all possible. And the big benefits of bringing these big changes have traditionally gone to the enterprises that had access to these technologies. Today, not only is the potential of technology to bring in greater and faster change infinitely heightened, the barrier to technology is at its lowest ever. Predictably, digital upstarts are beginning to leverage the same technologies as the big category leaders they are taking on. They are applying technology through resourceful new business models that focus intently on customers, and that has captured popular imagination. However, this growing perception that the new generation of digital natives is somehow uniquely equipped to unsettle the old guard is misplaced. Sure, tech giants like Amazon, Google, and Facebook continue to grow impressively, it is as much a reality that for more than 40% of the unicorns that went public since 2011, valuation stays flat or worse – has dropped.
So, what is the secret that might enable a company – especially the incumbent - to leverage digital technologies inventively and yet sustainably to make a tangible difference to business and society? The answer, I believe, lies in the coming together of three key factors: Mindset, Scale and Discipline.
Mindset: Embrace Creative Destruction
Most companies, I’ve observed, are really good at dealing with crisis situations, rapidly rounding up resources and acting both promptly and resolutely in response. But these same companies struggle to deal with the slow, quiet rise of an uncertain risk that does not necessarily announce itself. Like emerging disruption. This requires companies to relook at their portfolio of products and services with a mindset that accepts deep rooted change not excluding creative destruction. A great example is of Microsoft changing its thinking about Windows as its core, that then pushed the company to build Azure, its cloud computing service that now accounts for over $34 billion in annual revenue. Sometimes, this path could lead companies to destroy current revenue streams to make way for new ones, rather than let a hungry start up do that instead. China’s Tencent, founded in 1998 and having grown into the country’s largest and most-used Internet service portal, clearly embraces this perspective. They dominated online instant messaging with their QQ service for desktops. With the rise of the smartphone, the company’s leadership lost no time in instituting new teams to imagine and bring to life a different social media platform, that they knew only too well would cannibalize the existing QQ service. From that bold decision was born WeChat.
Scale: Think Big, Think Billions
I believe, it takes the same effort to think big or think small, so, we might as well think big. Besides, if a company really wants to move the needle at population-scale, make an impact and actually change the lives of people, there is no way out but to think at scale. In fact, this is not an act of charity but an act of strategy because winner-take-all marketplaces respond to solutions at scale with increasing returns to scale. And technology can be a reliable ally here. My own experience reaffirms this tenet. In building Aadhaar – India’s unique digital identity system, and in laying the foundation for the launch of the Unified Payment Interface (UPI), an initiative of the National Payments Corporation of India (NPCI), to more recently, the launch of the Account Aggregator, a Reserve Bank of India initiative that allows companies to act as aggregators and provide data empowerment to consumers - all initiatives that have been aimed at impacting over a billion people across the country - I have seen impact that is profound. More than 1.23 billion Aadhaar IDs have been issued since launch of the program in 2010, with 647 million Aadhar-linked bank accounts. Over 100 million people withdrew money through the Aadhaar-enabled payment system, which is designed and rolled out by NPCI to allow those who don’t own a phone to still be able to open a bank account using their Aadhar e-KYC and draw money in their village just by using their fingerprint. UPI did 1.2 billion transactions in the month of November 2019.
Discipline: Old Fashioned Business Building
If you look at companies that have thrived over the long term, not necessarily when they reign as leaders in their space but even as they began as startups and challengers, you’ll uncover the same fundamentals that enable these organizations to endure and thrive. Beyond the first flush of success, the first run in the market, those first levers of technology and even beyond the founding generation of leadership. The hunger of their early days is sustained but also complemented with unbending core values and the discipline of old fashioned business building: the focus on core values, strong governance, profits and sustained cash flow. And this is the secret of their longevity.
By adhering to this three-pronged approach, we will give new lease of life to a generation of companies that will have both the tenacity and the flexibility to leverage digital technologies in a way that truly moves us all forward.