Digitalisation and technological disruption have been at the top of the agenda for many businesses and sectors across the globe during 2017 and change is not in sight. While opening up manifold opportunities, digitalisation is throwing up multiple challenges. Doing business is becoming increasingly complex with pressures to innovate, reduce cost, adopt transformative technologies, create personalised customer experiences, adapt to changing markets and, exploit yet protect zettabytes of data. On top of that, businesses need to navigate a myriad of existing laws and regulations (general and sector-specific which are often not aligned and lagging behind technological progress) and scan the horizon for new emerging laws and regulations (and unexpected competitors) that could jeopardise existing or envisaged business models. Often on a global scale. With 2017 drawing to a close, we take a look at how technology is transforming and challenging every sector forcing businesses to rethink their business models.
The digitalisation of everything
No matter which industry you pick, digitalisation is having a substantial impact.
In the consumer goods & retail sector there is an all too obvious shift from bricks-and-mortar stores to multi-channel, digital, 24/7 shopping experiences. Knowing your customer and personalised marketing are a must for retailers. Digital wallets, dynamic pricing, high-tech fabrics and virtual changing rooms are becoming a reality. Commoditisation is a threat to many incumbent retail businesses from high-end fashion all the way to groceries as digital disruptors with lower cost operations enter the retail market and offer products at lower prices.
Speaking of online shopping - think about the transportation and logistics industry currently struggling with the pre-Christmas online ordering hype. With more than three billion parcels delivered in Germany during 2016 (more than 10 million per day), it comes at no surprise that couriers are struggling to deliver fast and on time and are testing robots, drones and other smart delivery options.
Baker McKenzie's Asia-Pacific HealthTech Report predicts a tectonic shift in healthcare thanks to technology. Change is multi-facetted and includes technologies such as wearables, genome sequencing and big data analytics (just to name a few) triggering a shift in focus from curing diseases to preventing them. Wireless sensors enable remote monitoring of patients. Robotics and AI are poised to facilitate faster and more accurate diagnosis and treatment recommendations. For example, last month, it was announced that a Stanford algorithm can diagnose pneumonia better than radiologists. While benefits are significant ranging from greater efficiencies to better treatment and access to health, many traditional healthcare businesses face pressures to adopt more patient-centric business models, leverage technology and reduce costs.
In the media and communications space, OTT services that allow the on-demand viewing of content across multiple devices and meet the demands of the modern consumer for personalised and shareable content have left broadcasters to redefine their business model. Similarly, telecoms operators are forced to look for new revenue opportunities due to a significant decline in traditional revenue streams from calls and sms as consumer consumption patterns change.
The list could go on - car manufacturers are making autonomous vehicles a reality, smart power is transforming the energy sector and banks have long been challenged by fintechs.
The (challenging) power of technology
As is perhaps apparent from the above, technology is conquering every sector. Whether you are a car manufacturer, a clothing retailer, a healthcare provider, a bank or a utilities company, in order to remain competitive, you need to think about how technology can transform your business (or you are at great risk of being disrupted by technology and your competitors). This is easier said than done.
According to our 2017 Asia Pacific Simplifying Business in a Complex World Report (Report), transformative technologies are the single most pressing and complex challenge businesses in Asia Pacific face across sectors (and this is likely to hold true for other regions as well). The challenge is two-fold: on the one hand businesses are under pressure to leverage technology to innovate in the digital world, on the other hand, they are constantly at risk of being disrupted by competitors leveraging technology (in fact 84% of survey respondents expect that their industry will see major technological disruption in the next two years).
Across sectors, Cloud Computing, Big Data and Artificial Intelligence/ Machine Learning have been identified as the technologies that will have the greatest impact on businesses in the next two years and will also see the greatest investment from businesses (with Big Data topping the list).
It comes as no surprise that big data tops the list in terms of both business impact and investment. In the digital world, the value that can be derived from (big) data is huge and creates tremendous opportunities for businesses of all sizes and industries. A new McKinsey Global Survey on data and analytics confirms that an increasing number companies are using data and analytics to generate revenue (monetizing data) and create value for business and customers. It also finds that data monetization correlates with industry-leading performance and that businesses in basic materials and energy, financial services and high tech are ahead of the curve when it comes to monetizing data. From a competition perspective, the survey notes that new data-focused businesses have high potential to undermine traditional business models.
Overall, data monetization is still in its infancy with most businesses only starting to figure out how to leverage, and generate revenue from, data. But if not on the agenda yet, now is the time to develop a data strategy which identifies ways to leverage and generate revenue from data. Needless to say that such strategy should be devised with a close eye on the law with GDPR starting to apply in less than six months and increasingly complex and sophisticated data privacy and protection requirements emerging around the world.
A few final words
While data and compliance with data protection laws are key in the digital world, technology and digitalisation raise complex legal issues across the spectrum ranging from employment to IP, cybersecurity, M&A, tax, antitrust and competition and so forth. With technology developing faster than the law, the answers to legal questions are often not clear creating more complexity and uncertainty. But as Ai Ai Wong - a member of Baker McKenzie's Global Executive Committee - is quoted in the Report as saying: "Businesses should not fear complexity, but rather embrace it and get in front of it. With change and complexity comes opportunity. A business which actively seeks to engage the new generation of consumers and corporates with creativity and innovation will stay ahead of the game".
Wishing all our readers a happy holiday season and good start to the New Year with some time away from the screen!