Digital technology has unleashed a perpetual hurricane of creative economic destruction. Software is not only eating the world, but also many mid-sized businesses. Only the paranoid will survive, and here is why:
Timescales have changed.
The long term used to be a nebulous dot on the horizon. But today, time has been so sped up by technology that whatever once appeared long-term is happening now. Take for example, the robot economy, once the preserve of science-fiction writers. Today, however, what is now known as artificial intelligence or machine learning is about to change every industry—from education to healthcare to transportation.
The future is here and it’s not evenly distributed.
That is a quote from the cyberpunk writer William Gibson, and he is right. From Google’s self-driving cars to Amazon’s drones, to the Apple Watch, we are now all living in the perpetual future. And with Moore’s Law showing no sign of being proven wrong, more and more seemingly impossible technologies are about to not only become plausible, but inevitable. These technologies will radically transform entire industries, making some existing ones redundant while creating new verticals, new scarcities and new business opportunities.
Every company is a technology company.
There is no escaping the consequences of technology’s rapid evolution for any business. “Ah, but my company isn’t a technology company,” some CEOs of mid-sized companies might say. “We don’t need to worry about technology,” they would reassure themselves. “It doesn’t affect us.”
As Reid Hoffman, the co-founder of LinkedIn and one of Silicon Valley’s most prescient investors has said, every company is now—like it or not—a technology company. From the impact of 3D printing on the traditional manufacturing industry (not to mention it’s run-on effects on distribution) to the impact of wearable technology on the fashion business and self-driving cars on the transportation industry, networked technology is radically disrupting every sector of the economy. Medicine, education, government, energy and banking are all about to be revolutionized.
The long tail was an illusion.
Many of the internet’s most fervent evangelists promised that the digital revolution would democratize business life, creating more small and mid-sized companies that could all thrive in what has become known as the Long Tail economy. But the Long Tail is, in truth, a long tale. The digital revolution has created a winner-take-all economy of neo-monopolists like Google, Facebook, Apple and Amazon. Digital technology—particularly the distributed technology of the internet—is creating a new aristocracy of digital companies that are attracting the attention of antitrust legislators in Europe and the United States.
The biggest threat of all: Monopolies.
Mid-sized companies should beware. You are the roadkill of the new economy. “Average is over,” the American economist Tyler Cowen thus predicted a networked economy characterized by a tiny handful of dominant companies. The impact of this winner-take-all economy on smaller businesses is deeply troubling and the CEOs of these smaller companies need to be very worried about the viability of their businesses. Every industry now is threatened by massively financed upstarts seeking to hollow out an economy traditionally dominated by mid-sized companies. Uber, for example, threatens to sweep away tens of thousands of midsized taxi companies. Airbnb may well represent the death knell of thousands of mid-sized hotel chains. That’s why, of course, Uber is now valued at around $40 billion and Airbnb at around $20 billion.
It’s time for mid-sized businesses to think big, to be audacious, and to use technology to move their businesses forward. The perpetual future is here—if these companies don’t live and breathe this reality, then they will become businesses of the past.
“Emiliano ‘Third’ Librea is a partner, head of Advisory Services and chief information officer of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing firms in the Philippines, with 21 partners and over 800 staff members.