Don’t let Google, Facebook, Microsoft and Amazon eat your lunch!
Non-tech enterprises have a lot to worry about the big four: Google, Facebook, Microsoft, and Amazon. Software is eating the world and these four really understand how to build software and are slowly encroaching out of just software and IT to almost all other sectors and verticals. Incumbents in non-tech have a big reason to be worried and they should be.
The big four have perfected not only the art of building software but also building it at a breakneck speed. As silos are broken and domain expertise reduced to a finite set of rules of engagement, software is able to automate and AI/ML are able to augment and accentuate non-automatable scenarios. As the big four forge partnerships and hire aggressively to build this domain expertise, they are able to build and ship software that understands and delivers exactly on the needs of the enterprise customers making the incumbents and their offerings look archaic, obsolete and out of touch.
Make no mistake, these software companies are looking left and right for new vertical to enter, disrupt and monetize. Having perfected building and shipping software and realized that various industries are ripe for disruption through the efficiency, automation and flexibility offered by software, these giants are looking to move into new domains.
The Tech Company Advantage
The following characteristics distinguish tech companies from non-tech companies.
Tech companies have infrastructure on demand offered as a service to their developers. This enables developers to never have to wait for hardware, software, development equipment etc. These companies go to extreme levels that developers do not have to spend their time on infrastructure issues.
Tech companies have platform capabilities offered as a service. This can be security, authentication, authorization, data, technology, logging, monitoring, deployment and automation capabilities that a developer does not need to build from scratch and those that are required virtually in all applications.
Tech companies focus on achieving unprecedented levels of automation right from how new developers and users are onboarded on to products and development platforms to how applications are built, deployed, tested and improved. Automation reduces costs due to less manual involvement, increases quality by removing the variance in human behavior between different humans and in the same human between different contexts.
Focus on Applications and app-centricity
Tech companies measure themselves by building customer-facing applications that deliver real, quantifiable value to the user. App-centric architectures ensure that the lion’s share of the effort in any project is designed to contribute to the application and the user’s experience and solving real problems and not on the underlying required infrastructure and platforms.
Agility & Efficiency
Tech companies aim to be incredibly agile and efficient by organizing themselves around customer’s and their problems and offering the greatest possible autonomy to self-sufficient teams to tackle the most important problems and control their own success. By connecting the customers with the application and product teams, tech companies ensure that there is a dedicated communication and feedback channel between the customer and the team leading to faster iteration and improvement of the product/service.
Tech companies focus on technology and enabling technology to be leverage appropriately where it can add value. Tech companies leave the decision to leverage any particular technology up to the product team driving both flexibility and accountability with the product team on their decision to experiment and leverage tech as needed. By both making it easy to leverage new technology and leaving the decision to the team, tech companies ensure that technologies are utilized appropriately towards the single goal of better customer experience.
Tech companies have become the model for a culture that promotes openness, risk-taking, and innovation. By ensuring that information is never blocked, hoarded and easily shared and leveraged to experiment and innovate, tech companies are able to reduce the cost of experimentation and make these experiments more likely to succeed due to the higher quality and unfettered access to required information. Teams and divisions do not hoard data and information and all information is made accessible to anyone through a consistent interface.
Tech companies realized a long time ago that their data – data that they generate or acquire from their applications, systems, platforms, processes, partners, users, customers etc. and its use is the key to innovate rapidly. Tech companies ensure that their data is clean, curated, organized and made available for use and analysis as it is created, as fast as possible and is still guaranteed to be accurate, a clear reflection of the truth and the current state. In addition, tech companies focus on ensuring that the data is available in the form that matches the intended use case and analysis ensuring that the data consumer gets the best possible experience and efficiency in how they are able to access and leverage the data.
The Tech Company Disadvantage
Virtual to Physical World
Tech companies were born in the virtual world and then steadily have moved into the physical world. A few companies have made this transition well whereas a majority have struggled to make this transition. This is a key disadvantage for tech companies and can require massive investments of time and money to make the transition. Non-tech companies should not lose this advantage rather should think hard about how to make this a competitive advantage and a differentiator for their services and products.
Tech companies are not naturally expert in other domains apart from tech. This forces them to spend a lot of effort partnering with domain experts or bringing these experts in-house on a full or part-time basis to develop the expertise. This is a resource and capability that non-tech companies already have however these companies need to ensure that they are constantly focusing on digitizing this expertise to make it readily useable in the virtual world.
Customer Relationships & Trust
Non-tech companies already enjoy existing customer bases and relationships based on trust or high switching costs. Because tech companies do not have this, they are forced to pay a high price to acquire these customers and users and often require highly mature products to prompt users to switch. The delta of work required to delight these existing customers and users is much lower and can be achieved through thoughtful planning and aggressive execution.
Understanding of Value
The most important element of a non-tech enterprise is its understanding and expertise about what value means for their customers and users. Building this understanding is bound to take the tech sector a lot of effort and cycles. Because non-tech companies already have this understanding, the only gap between them and success is the development and delivery of applications that leverage the best technology, platform, and infrastructure to exceed the value expected by users.
Typical Path to Disruption
It is critical that enterprises understand how a tech company could potentially disrupt them.
Step 1: Partnerships
Tech companies typically will start with partnerships with non-tech enterprises to enable non-tech enterprises to leverage technology to improve their products and services or leverage the channels, platforms, and users that tech companies might have to target and acquire new customers. A clear example of this is the ad networks run by the big tech companies and the various properties that these companies own where these ads can be displayed.
Step 2: Displacement
The next step typically involves the tech company bringing a new offering to the market that attempts to address a yet unaddressed niche in the nontech companies’ market. By going after unaddressed gaps, the new service provider can cultivate a user base. In this stage, the new offering works in tandem with other larger offerings in the market. Money transfer capabilities embedded in messaging applications is an example of this strategy.
Step 3: Software Enhanced Applications & Experience
The next step usually involves the tech company delivering a full-fledged product offering to the market as thus far, they would have perfected a solid MVP and developed enough domain expertise to hypothesize and experiment enough to determine the ideal product/service offering. Amazon’s take over of WholeFoods is an example of this strategy.
Prepare to Not be Disrupted
What can non-tech do to not be disrupted?
Leverage Infrastructure & Platforms
Non-tech enterprises should put their full force and energy into leveraging existing platforms and infrastructure instead of rebuilding capabilities that exist already. Instead, the focus should be on building new applications or enhancing new offerings through the power of software and technology.
Seek Tech Partnerships
Non-tech enterprises should seek tech partnerships to understand the latest technology trends and frameworks faster and get the confidence to leverage these technologies in their applications.
Incentivize App Building
Non-tech enterprises should restructure themselves to incentivize application development in their enterprise. This begins with making it easy and efficient for developers to build applications through the deployment of appropriate infrastructure and platform services. Next, product development needs to be promoted as strategically important for the company and the management. Enterprises should clearly define what the enterprise values and ensure that employees understand that promotions and career growth are closely tied to the delivery of value-generating applications and products.
Cut through Tech Hype
Non-tech enterprises need to develop the competency to really understand the latest technology and the risks and rewards associated with any new technology. Apart from understanding whether a technology is growing and being adopted for real, customer-facing use cases, enterprises should be able to cut through the hype associated with any technology and clearly understand what it can and cannot do for the enterprise.