During these university years we have seen a lot of models, a lot! Think of Porter’s five forces or a more recent one: the theory of newly-vulnerable markets (TONM).
Both these models talk about the threat of new entrants or what TONM calls, newly easy to enter. This threat entails that incumbents have to watch out for new market entrants as they might take their profit. These new entrants have learned from the mistakes that the incumbents made. In addition, if the incumbents are serving customers that are less profitable, the new entrants can solely focus on customers that have high profit margins. New entrants can also be seen as start-ups, and it seems a valid point that they pose a threat.
However, the “Financieel Dagblad” just published an article saying, don’t mind the start-ups, be scared of tech-giants. Where I was convinced that start-ups do pose a real threat, in the technology market the tech giants are the ones to watch, apparently. The three main tech giants are Amazon, Facebook and Google, of course.
Annet Aris, teacher of digital strategy at INSEAD, actually advises companies to look at these giants instead. They are posing threats rather than the start-ups. According to the article, this can be explained by the data, the algorithms the giants hold, and their money. If they enter your market, you should definitely be worried.
Partick van der Pijl states that there has been a shift of focus. Four years ago, companies were afraid for the start-ups and what they were doing. However, nowadays the focus is on the development of technologies and how companies should prepare for these upcoming changes.
What do you guys think? I think the article makes a valid point. Although some start-ups have made an impact (Uber & AirBnB), a lot of them have not. In the end, these tech incumbents still seem to rule the market.
Pretty interesting in how the focus is shifted from the fear of startups to the tech-giants. I think Patrick van der Pijl has a valid point but I think tech-giants shouldn’t totally keep startups out of their sight. Startups do have lower amounts of funding and resources, but as you said, some have been able to make an impact. The advantage that startups have over tech-giants is that they have more agile and lucrative business models. Tech-giants have long-term business goals that they must take into account while startups have the ability to push the boundaries of the market.
I think some companies have it figured out. The re-invention phase, as discussed in the lecture, is where tech-giants are buying startups. Tech-giants have to keep thinking out of the box with their innovations and acquiring promising startups is probably one of the most effective ways to do so.
Hey Merel, interesting post! Here’s my view on it:
First of all, successful startups definitely make an impact – they innovate the market and challenge the existing giants, forcing them to step up their game and compete, or just buy the smaller start ups and work on the innovation in-house.
Look at Facebook – it has bought up Instagram and WhatsApp in their quest to become the number one social network in the world. However, Snapchat didn’t want to join and what you see happening now is that Facebook is competing with them with all their force – copying almost everyone of Snapchat’s main functionalities (e.g. geo-filters, story, and temporarily photo sharing) and adding them to all their platforms (story mode in Facebook, Instagram and even Messenger and Whatsapp). Because of this Snapchat was forced to look into other fields to innovate and added hardware (Spectacles).
The point I’m trying to make is – whether there is collaboration or competition is not important, if the startup has a good or innovative product impact will be made!