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As companies become more optimistic about their prospects in the years ahead, they still face the challenge of managing macro-economic uncertainty. But it is becoming clear that if they are to secure the growth they are looking for, they will need to decouple their revenue strategies from the generally improving macro-economic conditions and, instead, focus on the long-term structural shifts that are fundamentally changing their traditional markets. Above all, it is the impact of digital technologies on these markets that they need to address.
Rapid advances in digital technology are reshaping the corporate landscape, dissolving traditional barriers between industry sectors and creating broader, higher-growth markets. That’s why we see the supermarket chain Tesco offering streamed home entertainment to its UK customers, or Alibaba, the Chinese e-commerce platform, offering finance to its small merchants.
Non-technology drivers are also opening doors to new players. For example, fiscal austerity has enabled private companies to provide government services to the public, as we have seen with companies from many sectors working with universities to extend the market for online education. Changing customer values are creating new opportunities and the proliferation of car-sharing companies illustrates this clearly.
While mastering digital technologies is critical to success, it will be just as important to be willing and able to create open and flexible business models and collaborate with partners from other sectors. It is encouraging, therefore, that our recent global survey of business leaders revealed that 60% intend to pursue growth in, or in collaboration with, other industries.
As they do so, they are creating what we call “digitally contestable markets”. These markets are characterized by participants from multiple sectors joining forces and by consumers who are becoming more agnostic as to which companies or sectors serve them. And these broader, digitally enabled markets also promise higher rates of growth. For example, our research shows that the core US healthcare sector is expected to grow at 2.5% annually between 2012 and 2018, but digital technology – such as remote diagnostics and electronic records management – will help drive annual growth of 3.3% in the broader market for staying healthy. And the United Kingdom’s core financial services sector is projected to grow at 2.0% per year between 2012 and 2018, but the wider digitally contested “paying” market will experience annual growth of 2.9%, thanks to digitally enabled trends such as crowd funding, peer-to-peer lending services and virtual wallet applications.
Looking at the high performers in this new era, three key steps to success stand out. First, companies need to use technology to better understand their customers in order to make themselves more relevant. Burberry has done that with a data system that makes customer histories available as soon as customers enter the store, allowing shop assistants to offer more relevant and individual service.
Companies should also be prepared to take on different roles with partners, as Telefonica did with Santander, to support e-wallet and peer-to-peer payment apps, and with Generali, to provide “pay-as-I-drive” car insurance services.
Finally, they need to use digital to speed up decision-making and product development, and to improve operational agility. For example, US yacht manufacturer Viking Yachts partnered with Autodesk to prototype its designs through 3D printing, enabling it to make changes up to 40 times faster.
In these respects, it is the marriage of digital and “analogue” skills that mark out the winners in these new digital markets. It is that combination that permits them to disrupt their own industry before someone else does. By doing so, they are likely to find more secure new sources of revenue, no matter what the world economy throws at them.
Author: Mark Spelman is managing director at Accenture. He is participating in the World Economic Forum Annual Meeting 2014 in Davos-Klosters.
Image: A mock Bitcoin is displayed on a table in an illustration picture taken in Berlin January 7, 2014. REUTERS/Pawel Kopczynski
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The views expressed in this article are those of the author alone and not the World Economic Forum.
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