Digital Consulting – Enabling Intrapreneurship at (former) Market Leaders

8

October

2017

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Digital transformation is no longer merely a buzzword that describes the disruption of information-heavy but low-asset industries, as experienced by the music or the news media industry, but the connectivity of physical infrastructure spreads digital disruption to entirely different environments. Think of the classic cases of Uber and Airbnb, which circumvented the high entry-barriers of the taxi and hotel market, respectively, by running a platform-mediated approach and saving on high up-front expenditures – but also think of the logistics industry, for example, where large and dominant incumbents such as UPS or DHL have to adjust their business operations to encrypted blockchain consignment tracking technologies and the delivery by drones. Technological innovation in the form of digitization is not necessarily harmful for former (or current) market leaders – in the words of Michael Porter, it is in fact easier for established companies to implement digital technologies than for digital-born companies to build operational competitive advantages (Porter, 2001). However, large incumbents, especially in asset-heavy industries, suffer from bureaucratic organizational structures and missing digital knowledge among its employee base, which exacerbates a shift in the operational strategy. In addition, the management of these companies is traditionally focused on supply-side of economies of scale and income statement KPIs such as revenues and profits – to flourish in the digital era, platforms must think in terms of in terms of demand-side economies of scale and interactions between users and suppliers to leverage networking effects and maximize value generated on the platform (Alstyne, Parker & Choudary, 2016)
Since large (and cash-rich) companies lack the internal knowledge and determination to independently implement a digital strategy, consultancies increasingly concentrate on providing this service. I was allowed to spend the past three days in Paris with the BCG Technology Advantage Group, which is a recently founded division that supports large players in different industries in digitizing their business operations. Digital-focused consultancy teams have the required expertise and experience to take a rational perspective of digital benefits in light of their inherent risks and implementation costs, which provides a solid foundation for many established companies to take the step into the digital world. Moreover, strategy & IT consultants in general and Bain, BCG and McKinsey in particular, have the reputation and the management contact to implement a digitization strategy from the top with CEO support, which is vital to successfully move the organizational structure and the employee base into the digital era. By reshaping organizational cultures and structures and communicating a new way of tech-driven and innovative thinking, digital consultants provide companies with new space for agility and intrepreneurial spirit to compete successfully and sustainably in continuously changing industries – if implemented appropriately, the potential upside to companies also vindicates the usually exorbitantly high consulting fees.

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Digital Consulting – Enabling Intrapreneurship at (former) Market Leaders

8

October

2017

No ratings yet.

digital-marketing-consultant-in-india

Digital transformation is no longer merely a buzzword that describes the disruption of information-heavy but low-asset industries, as experienced by the music or the news media industry, but the connectivity of physical infrastructure spreads digital disruption to entirely different environments. Think of the classic cases of Uber and Airbnb, which circumvented the high entry-barriers of the taxi and hotel market, respectively, by running a platform-mediated approach and saving on high up-front expenditures – but also think of the logistics industry, for example, where large and dominant incumbents such as UPS or DHL have to adjust their business operations to encrypted blockchain consignment tracking technologies and the delivery by drones. Technological innovation in the form of digitization is not necessarily harmful for former (or current) market leaders – in the words of Michael Porter, it is in fact easier for established companies to implement digital technologies than for digital-born companies to build operational competitive advantages (Porter, 2001). However, large incumbents, especially in asset-heavy industries, suffer from bureaucratic organizational structures and missing digital knowledge among its employee base, which exacerbates a shift in the operational strategy. In addition, the management of these companies is traditionally focused on supply-side of economies of scale and income statement KPIs such as revenues and profits – to flourish in the digital era, platforms must think in terms of in terms of demand-side economies of scale and interactions between users and suppliers to leverage networking effects and maximize value generated on the platform (Alstyne, Parker & Choudary, 2016)

Since large (and cash-rich) companies lack the internal knowledge and determination to independently implement a digital strategy, consultancies increasingly concentrate on providing this service. I was allowed to spend the past three days in Paris with the BCG Technology Advantage Group, which is a recently founded division that supports large players in different industries in digitizing their business operations. Digital-focused consultancy teams have the required expertise and experience to take a rational perspective of digital benefits in light of their inherent risks and implementation costs, which provides a solid foundation for many established companies to take the step into the digital world. Moreover, strategy & IT consultants in general, and Bain, BCG and McKinsey in particular, have the reputation and the management contact to implement a digitization strategy from the top with CEO support, which is vital to successfully move the organizational structure and the employee base into the digital era. By reshaping organizational cultures and structures and communicating a new way of tech-driven and innovative thinking, digital consultants provide companies with new space for agility and intrepreneurial spirit to compete successfully and sustainable in continuously changing industries – if implemented appropriately, the potential upside to companies also vindicates the usually exorbitantly high consulting fees.

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What are nearly 500 WhatsApp employees doing all day?

30

September

2017

5/5 (2)

What would life be like without WhatsApp? The Internet communication service, founded only eight years ago by Jan Koum and Brian Acton, has already vastly replaced old-school SMS communication as well as non-Internet calling and is nowadays among the under-18 generation the preferred alternative to Facebook and by corporate employees higher valued than Email messaging for informal communication. Whatsapp’s user growth rates are astonishing, increasing somewhat linearly from 500m in April 2014 to 1.2bn in January 2017 (Source: Statista). Facebook’s acquisition of WhatsApp in October 2014 was initially scrutinized by investors, sending the stock down by 6.7% within two days of the deal announcement (Source: Yahoo Finance) – but investor sentiment about the strategic fit seems to have changed 180 degrees, boosting Facebook’s stock price to new all-time highs month after month. Mark Zuckerberg and Jan Koum have expanded Whatsapp from a 55-men organization in 2014 (Source: BusinessInsider) to a global Facebook subsidiary service with nearly 500 employees in 2017(Source: Linked) – however, considering the lack of innovation and updates in the app, I was wondering: what are WhatsApp employees doing all day?

Startups dominantly hire employees for one of three roles; sales, IT specialists, and business development. Considering the immense user growth and the expansion to many new markets, Whatsapp’s sales force must be up and running. Yet, selling and expanding the most popular social media network is highly scalable and requires much less manpower than doing door sales for hoovers or charity funds. The tech team continuously needs to maintain and improve the IT infrastructure, so that the server capacities can sustain the demand from an increased user base. However, this task is largely overlapping with the duties of Facebook’s teach team and cost synergies from a reduction of the tech workforce were a dominant rationale for the Whatsapp acquisition (Source: Fortune). This leaves us with business development. Indeed, Whatsapp has a high and pressuring need for filling such positions with skilled and innovative characters, since it has yet failed to report a positive bottom line. The company’s newest strategy is to establish Whatsapp as a corporate messaging tool and to charge companies for a business-optimized version. Even though this may be a very reasonable step to finally monetize the social communication service, I highly doubt that it requires a team of 100+ employees to implement this strategy.

Personally, I consider it intuitive that a company in the stage and environment of WhatsApp has a large business development team – however, I am doubtful whether a complete focus on monetization is the appropriate strategy. Given its role as market leader and its power through very positive networking effects, WhatsApp seems to underestimate the threat of new entrants – but advancing technology and new business models do challenge WhatsApp’s dominance. To give you two examples, the team communication application Slack has continuously improved its customer value propositions and recently achieved an increased valuation of $790m and the LA-based startup Dust, advised by Mark Cuban, offers a blockchain messaging platform that brings data security to a new level and allows its users to delete messages from the communication history. In order to stay ahead of its competition, WhatsApp should not only work on monetization strategies but also continuously improve its functionalities in order to keep its user base satisfied. Since sharing is caring, I want to use this occasion and propose two ways to augment my user experience: first, allow me to set reminders and calendar entries for my friends; second, enable the copying of chat histories that can be sent as a scroll-down item in lieu of several screenshots of a chat that you want to share with friends. These ideas represent no big innovation, but signify the main message of this blog post: In order to make monetization work, it needs both a good strategy and a large network. While WhatsApp currently searches for the first item, it should watch out to simultaneously maintain its exiting. In that sense, I suggest WhatsApp to direct a larger fraction of its workforce to maintaining and improving customer relationships – then I may eventually also understand what its nearly 500 employees are working on all day.

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