One of the main topics of the moment is the digital transformation, which according to Wikipedia is:
“Digital transformation refers to the changes associated with the application of digital technology in all aspects of human society. Digital transformation may be thought of as the third stage of embracing digital technologies: digital competence → digital literacy → digital transformation. The latter stage means that digital usages inherently enable new types of innovation and creativity in a particular domain, rather than simply enhance and support the traditional methods and how companies should.”
This digital transformation is taking us into another movement of entrepreneurs. According to the Kaufman Index of Entrepreneurial Activity (KIEA), the entrepreneurial rate in the U.S. is already well above the dot.com bubble of 15 years ago.
Although we have slipped a bit this year from the high point of 320 new entrepreneurs out of 100,000 adults in 2011, it still adds up to over 20 million entrepreneurial businesses out there today, with more starting every day. It is also important to mention the new start-up ventures are coming more from “Opportunity” than from “Necessity” (see graph below).
On the other hand according to the Delloite’s M&A trends report 2014: “Over the past 18 months, merger and acquisition (M&A) activity has accelerated meaningfully in the U.S. That trend is poised to continue, if not accelerate, in many industries, among public and private firms and for both corporations and private equity firms, large and small, according to the survey findings included in the first annual Deloitte M&A trends report. Of the 2,500 corporate and private equity respondents, 84 percent of corporate executives anticipate a sustained, if not accelerated, pace of M&A activity in the next 24 months. Similarly, the vast majority of private equity executives (89 percent) are expecting average to high deal activity going forward.”
Digital transformation is making the number of new start-ups and M&A increase exponentially every year and sometimes you can ask yourself whether it is going to be the business ecosystem of the future? The clear trend that we saw as the traditional concept of business ecosystem as defined by James F. Moore “An economic community supported by a foundation of interacting organizations and individuals—the organisms of the business world. The economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors, and other stakeholders. Over time, they co-evolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments, and to find mutually supportive roles.” This concept has to evolve to a different level.
In the future, what will define the boundaries of a company in the future? Will this boom of startups and entrepreneurial spirit guide us to business ecosystem rather than just a company?
If we consider the population projected for 2050, according to the UN Report it will be 9.6 billion people, we can ask ourselves whether we are moving to a world of 9.6 billion companies or to the opposite extreme view of a world of 1 Company. If we consider the M&A trends and the elimination of boundaries between sector competitions, in the near future we will be drinking water from Google? The fact is that the traditional business model where the concern was to compete only within the company’s business sector is dead. The new business model is horizontal.
In the past if you were a car manufacture or a financial institution you had to compete and be concerned as a competitor in companies of the same industry, but the new business ecosystem is horizontal and crosses several sectors. For example: today, Audi and BMW have to compete with Tesla. The banks have to compete against other payment systems, such as Apple pay and Paypal.
The way we define management, strategy, leadership, process improvement, innovation and organizational charts must evolve outside the boundaries of the company. Business schools and executives of the future must be able to lead, manage and guide several agents in the business ecosystem (start-ups, small companies, universities, open innovation, etc. ) and many of them will be out of your companies’ boundaries and title.
“Gentleman's welcome to the NEW business fight club”
#1 The first rule of Fight Club is: you ALWAYS talk about Fight Club.
The new digital business ecosystem demands open innovation, crowd-sourcing, external communication, networking, leadership and management skills outside the borders of your company.
#2 The second rule of Fight Club is: you MUST ALWAYS talk about Fight Club!
In your company, do you spend more time thinking about how to protect information than talking about it and sharing innovation? The bigger and older the company the more “STOCKS” they have, which makes it difficult to change.
#3 Third rule of Fight Club: if someone yells “stop!”, goes limp, or taps out, the fight is JUST BEGINNING.
Most of the top executives are risk-averse. Everyone says stop and let’s evaluate the risks. Yes, these things are fundamental, but this is not a reason to stop thinking outside of your company’s daily operation. Your daily operation is just 50% of what you should be doing.
#4 Fourth rule: IT IS NEVER two companies to fight.
Forget the traditional sectors competition. The new digital business ecosystem is disruptive horizontally. You are competing with all companies in all sectors. All of them could be future threats to your business.
#5 Fifth rule: SEVERAL fights at a time, fellas.
Yes, you are competing not only against your main competitors. Look at how Apple Pay and Square are disrupting the payment industry.
#6 Sixth rule: the fights are NOT bare knuckle. Everything will be used as a weapon.
Take a look at the example of how Tesla Motors’ innovation from the IT sector to deliver and redefine the traditional car manufacturing industry.
#7 Seventh rule: fights will go on as long as they have to.
Maybe you are lucky and the fight will be like a Cola War (Pepsi vs Coke), with just 2 competitors, but in the digital business model you will have more than only one competitor and the fights for survival will happen every day.
#8 The eighth and final rule: if this is your first time at Fight Club, you have to fight to survive.”
Please don’t say: They are not our competitors; our strategy, business model and clients are different.
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I’d enjoy hearing from the LinkedIn community about how the digital business is changing the business ecosystem.
It is an enormous pleasure to have you read my post and provide some feedback. Here, at LinkedIn, I regularly write about IT, Innovation, Leadership and Management with a personal touch. Please feel free to connect.
[Photos: Fight Club]
[Data: Deloitte, Wikipedia, Kaufman]
