Harnessing the Potential of the Digital Economy
The popular saying used to be that big fish would eat small fish. This has since changed significantly in the light of recent happenings in the global economy; Uber, until recently a relatively unknown company out of Silicon Valley in California employs 160,000 drivers today, and is adding an average of 20,000 drivers every month.
This transport services disrupter is now valued at $41b(N8.2tri). Another previously obscure company with similar roots, Airbnb, has over 1.5m accommodation on her platform, and is now valued at $25b (N5tri). Upwork, a platform that connects businesses with freelancers have gone from zero to $1b (N200bn) revenues in just five years and projects to reach $10b (N2tri) in the next 5 years.
The new disrupters are not confined to just North America and Europe. China’s foremost e-Commerce business, Alibaba’s recent listing on the New York Stock Exchange broke all records with a valuation of $170b (N34tri). DiDi Kuaidi, a Chinese transport platform is pooling over 8m drivers and serving 10m commuters every day, in a consumer to consumer model.
CWG Follows the Trend
Here in Nigeria, CWG, has seen a record uptake of 6m new Accounts on the Diamond Y’ellow Account platform; a mobile banking product that she white labels, and recently launched in conjunction with MTN and Diamond Bank, targeted at the 60m MTN subscribers in Nigeria.
The new saying today is that fast fish will eat slow fish. Nimble, highly innovative companies are taking advantage of ubiquitous broadband and smartphone penetration to push business models that ride on providing virtual products over a virtual channel, thus pushing transaction velocity to the limit, and securing a bigger slice of the pie in the process.
These companies, primarily in the technology industry are rapidly disrupting long standing businesses in a model that would not have been possible as early as a decade ago, and racking up huge valuations in the process. Welcome the Czars of the new sharing economy, also sometimes referred to as the gig economy, or the on-demand economy. WhatsApp, founded in 2009 already handles 10b more messages a day than the SMS global text-messaging system, and was recently acquired by Facebook, another technology behemoth for $19b(N3.5tri).
Satisfying Digital Customers
This new business model is simply meeting a pent up demand of consumers. Today’s customers demand to have their products and services delivered to them wherever and whenever, and do not necessarily want to cut a cheque or reach for their wallets to pay. They usually bank online and are less likely to have paid a visit to their banks in the past one month.
Disrupters such as Apple seem to have heard them very clearly and is working round the clock to provide a seamless payment solution. ApplePay currently serve users of IOS devices who have registered their credit or debit cards. It is used to pay for goods at shops that have Near Field Communication (NFC) readers. Apple is now developing a peer to peer option, which puts it directly in competition with more established players such as PayPal. It is not only Apple that is circling around PayPal’s lunch. Samsung has a similar product, and Google used to have Google wallet.
Cloud Computing is Here to Stay
It seems that Cloud Computing has finally come of age, as these disrupters typically deliver their platforms over the cloud. Oracle has started offering cloud services including databases. Microsoft’s only growing business is her cloud services. Amazon’s only profitable business is her cloud services, which now includes online database as a service. Our own company, CWG launched her new subscription based business model christened CWG2.0 on the Cloud Platform. It enables the business to seamlessly scale globally, without having to make any investments in brick and mortar.
The global economy seems to be moving from getting supply from companies, to a crowd sourcing model in a peer to peer way. Regulation of this ‘new normal’ is quite a challenge because regulation is backward looking while innovation is forward looking, so there is always a gap which creates considerable tension. It takes quite some time for regulation to catch up with technology, so there is a period of time where the disrupter seem to be operating in “no man’s land” as far as the law is concerned.
Another major challenge in the new economy is data security. The bigger problem is about governments getting interested wherever there is large amount of data and seeking to gain access to it, perhaps for tax purposes, security or otherwise. How do the new digital businesses, which typically generate tons of customer data handle this dilemma, given their promise to customers to respect the privacy of their information?
A research by the Financial Times shows that the UK government, which is seeking to extend its surveillance powers has paid telecoms companies, including BT, Vodafone, EE and Virgin Media more than £37m (N10.5bn) for data on customers and their activities since 2008. The recent celebrated case between the FBI and Apple in the US regarding access to a shooter’s iPhone is a further illustration of this point.
There is a lot of concern around the disruptive force of digitalisation and the need for inclusive growth and job creation. The impression is that digitalisation kills jobs through automation. The reality is that for every job lost through digitisation, 12 more are created, but you may need retraining and retooling to benefit.
In reality, digitisation provided a whopping $193bn(N38.4tri) boost to world economic output and created 6m jobs globally in 2011, equivalent to a 1.02% drop in the unemployment rate. It is very clear that we are at the throes of a new digital economy. Companies who fail to adapt to the new imperatives of the shared economy should prepare to write their obituaries.
Austin Okere is the Founder / Executive Vice Chairman, Computer Warehouse Group (CWG) Plc