Traditional industries are going through a radical change propelled almost entirely by the rapid emergence of huge amounts of data alongside new emerging business models. The pace of change is completely unprecedented, with 90% of stored data in the world today being created in the past 3 years, and with more than half of the Fortune 500 companies having declined in revenue in 2016. Businesses are left scrambling to compete, with the strongest companies surviving by utilizing data to build new revenue streams. Unfortunately, many companies do not feel properly equipped to handle the imminent changes brought on by data in the new digital world.
According to the New York-based think tank L2 (recently acquired by Gartner), 9 out of 10 organizations are undergoing a digital transformation, yet only 14% of them think that they are moving fast enough. This is perhaps due to the fact that only 15% of businesses believe they have the skills and capabilities to guide a digital strategy - and how can they when only 19% of businesses believe that they have the right people needed to develop and map a digital strategy?
But things are changing: 67% of the CEOs of Global 2000 enterprises will have digital transformation at the center of their corporate strategy by 2018. As Robert Greifeld aptly stated on CNBC’s “Fast Money”: “It means really that you see...the new economy which we talked about 15 years ago has really become the economy.” The future has arrived, and data is the oil that will power the new economy - but not without taking a few casualties along the way.
Data is the new oil, it is only valuable if we can extract the meaning from it.
The current rate of innovation and technological adaptation is forcing companies to accelerate their digitalization strategies, but not all companies are managing to stay afloat: 52% of companies in the Fortune 500 in 2000 have either gone bankrupt, been acquired or simply ceased to exist by 2015. However, the companies that have best adapted to the changes brought on by the advent of data-driven businesses are going above and beyond all financial expectations, with - for the first time in 2016 - the top 10 tech companies in the Fortune 500 generating more revenue than the top 10 energy/oil companies (870B vs. 765B USD). While source and monetization of oil was a regional phenomenon - determining the wealth, influence and status of societies and countries, data knows no borders and will inevitably go on to drastically reshape politics and policymaking for global trade. Data, contrary to oil, can be generated, moved and duplicated at almost zero cost.
Countries will need to ease trade barriers and accelerate innovation in order to stay relevant, with previous global tech leaders now losing out to countries that are deploying huge amounts of money into innovation centers and tech companies. Relatively new to the game, China tripled the available venture capital in a single year to 231 billion USD, fueling innovation and attracting outside talent to its startup scene. Even with a record high and 9.5 percent increase of Germany's R&D spending in 2015 (now 66.2 Billion USD) leading economies with traditional businesses have to catch up. By the year 2020, Europe and the US will have less than 50% of the global GDP market share, and this is largely due to the rapid rate of innovation in competing countries and the relative technological stagnation of the western world. For example, Apple accounts for only one-third of the top five phone manufactures, with the remaining two-thirds hailing from Asia, and mostly from China.
Digitalisation brings changes and threats especially to the established corporations and economies.
According to state media, an average of 12.000 new companies were registered each day in China in 2015. While not all were tech startups, the tech and internet sectors were among the hottest in China, with millions of new tech and internet companies registering that year. The implications of this are vast, but the most important takeaway is that everything that can be digitalized will be digitalized, creating unprecedented amounts of data that companies must learn how to extract, analyze, and employ.
Large corporations have to understand, and utilize new business models while cannibalizing their core business before others do with faster, more agile offerings based on the latest technology. Educating their top management and workforce is a crucial element, as well as partnering with startups and service providers to already immediately start building the foundation of their future digital businesses. All this has to happen with a hands-on approach involving entrepreneurs who have done it before. Digitalization means code, not powerpoint.
And for the companies that don’t digitize? They will be left behind, wiped out by the new startups and competitors that view digitalization as a state of mind and not as a one-time process that, once completed, will never again pose a threat to existing businesses. Data is now one of the most precious resources in our future economy, powering the new business revolution, just as oil powered the industrial one.