Internet’s Second Wave: Six Critical Decisions CEOs Must Make
Remember the days of the dotcom bubble? It really felt like there was a revolution happening. There was no business model that wasn’t disruptable. Some of the ideas were silly, of course, and when the bust hit, we saw lots of paper tigers go up in flames.
We’re now in the midst of a second internet wave of disruption. Technology is abundant and cheap; analytics are providing radical new insights; and new platforms – smartphones, tablets – are opening up totally new business venues. I don’t know about you but it feels like where the first internet wave was about opening up possibilities (that were often impossible to deliver on), this wave is fundamentally changing how we live and do business.
A great article that some colleagues of mine (Martin Hirt and Paul Wilmott) just published looks at the implications of this second wave. You can read the full article here (Strategic principles for competing in the digital age), but I wanted to highlight a few things quickly.
First, here’s a wonderful graphic that provides a clear overview of how digital is transforming business. The concepts here aren’t new, but it’s clearly laid out. And I want to call attention to the “Tipping point.” That’s where incumbents just fade away because they haven’t been able to adapt to the changed digital reality. We all remember Blockbuster, which became the Dodo bird of the digital age.
The article also lays out six important decisions need to make based on what’s happening in this second digital wave:
Decision 1: Buy or sell businesses in your portfolio?
Companies that lack sufficient scale or expect a significant downside should consider divesting businesses.
Decision 2: Lead your customers or follow them?
Digital efforts risk cannibalizing products and services and could erode margins. Inaction, however, can be just as risky.
Decision 3: Cooperate or compete with new attackers?
Companies can neutralize attacks by rapidly building similar products or services, or even acquiring attackers. However, cooperation with some attackers can make more sense than competing given the number of competitors in many cases.
Decision 4: Diversify or double down on digital initiatives?
Diversification reduces risks but the many resulting small initiatives, however innovative, don’t get enough funding to endure or are easily replicated by competitors.
Decision 5: Keep digital businesses separate or integrate them with current non-digital ones?
Integrating digital operations directly into physical businesses can create additional value but it can be hard to attract and retain digital talent in a traditional culture, and turf wars can break out.
Decision 6: Delegate or own the digital agenda?
Customer behavior and competitive situations are evolving quickly, and an effective digital strategy calls for extensive cross-functional orchestration that may require CEO involvement.
What decisions are you making to ride the Second Internet Wave?
Learn more about this and other topics at the McKinsey on Marketing & Sales site. Keep up with our latest by signing up for our newsletter and following us on Twitter @McK_MktgSales. And please follow me @davidedelman.
[Image: Sunova Surfboard, Flickr]
Growth | Hyper-personalisation | Marketing Science | Experimentation | Martech | AI ML Innovator | Seasoned Investor & Advisor | Growth Capabilities & Data Science Head @Grab Ex- Uber, PayPal, RS, Dell, GE
10ymost of the digital enterprises are pushing the business towards long-tail model ... which really need consideration from leaders ....as demand and supply theories of longtail model are quite different.
David, I am left slightly confused by this article for a variety of reason, not the least of which is the seemingly random list of questions and the really obvious context behind them. Ofcourse, technology changes things, it always has, since at least the time of the printing press (go back to the wheel if you'd like!) and change always means adaptation. Also, the way you frame the questions, in an either or format definitely oversimplifies the discourse. For example, is deciding to diversify or double down really a binary choice? Many would argue it is not. For example, an Airlines co. could double down on promotions via a standalone app, but diversify focus on their web properties. completely possible, and probably even desirable. Another example, lead or follow customers: Not sure what you are advocating here in specific since you offer downsides either way. In any case, you completely leave out partnering with them to jointly create solutions! Thats just one very basic option thats always there. Perhaps a more useful article would be to deep dive on one of these questions and make a concrete argument?
Global Chief Digital Officer- Organic growth leader, Global head of digital strategy, digital innovation, digital products, data and analytics.
10ySimilar to crossing the chasm
Staff Software Engineer
10yCheck out gopaperbox.com, a great free app for getting organized and keeping track of paper documents. It is becoming very popular and is receiving rave reviews!
Owner, 2daymedia/ North News and Pictures
10yThe digital evolution isn't all "blue skies and sunny days" OR "doom and gloom", but alongside the specific challenge.... this comment comes from the media world where the threats arrived just after they hit the music industry...is that the new digital terrain seems to challenge the structure to such an extent that the good gets thrown out with bad because copyright law and it's enforcement is so biased towards very large companies. Democratization is not a bad thing, and seeing the digital wave making space for something new, that creative destruction thing, is also a good thing...just as long as the 'new' isn't a succession of apparently 'good things' that together lead us to a bad place...Wikipedia, crowd sourcing news, trawling flckr and twitter are fantastic new digital innovations but to a degree they are making professional press photography increasingly a pocket-money profession, and changing the role of newspapers and web news sites at a very fast pace. No 'professional' has a right to charge a fat fee for a picture someone can source from somewhere else for a fraction of the fee...or even no fee at all. However there's little point blaming the untrained non-professional who CAN take great pics of great views and weather if they send a picture of the wrong person at court ...however nice the setting, composition, sky and lighting on it may be.... or to use a high profile recent example fail to make sure the supposed "Lord MacAlpine" the interviewee is on about, is really he same one THEY think are on about. The problem professionally in the media.. and I feel it will hit the Legal and Accountancy professions too....is finding a way to pay for these 'specialist areas' of the profession when all the 'easy money' has been commoditised away by the effects of digitalisation