When Steve Jobs launched the first iPhone in 2007, it opened doors to a whole new technology world. Along with this breakthrough product came an ecosystem, which has changed the way humans have interacted with computers. What changed, majorly was the consumerization of IT; IT was majorly restricted to Industrial usage and book-keeping type of individual usages. The App ecosystem has opened more avenues than ever in the digital era. You can now buy or sell almost anything online.
Today, this whole ecosystem has evolved multi-fold and opened up newer avenues. We hear a lot of buzzwords around Artificial Intelligence (AI), Machine Learning (ML) and Robotic Process Automation (RPA). These technologies are expected to be the next big thing in the Digital world. We are on the brink of a plethora of 5G enabled device launches. The overall picture looks bright for the Digital ecosystem in the near and long term.
Digital Ecosystem 2025
In the short run, i.e. in the next 5-6 years expect these new generation technologies to accelerate the overall growth. To the surprise of many China has been the front-runner in the technology adoption over the US, followed by again a highly populous country India. Technology has enabled people of these countries to solve some very teething problems, including financial inclusion. Expect China and India put their economies on fat track using Digital growth avenues. As per a report published by McKinsey, India’s digital economy shall reach $1 trillion by 2025, providing 60 Million jobs. China on the other hand already has strengthened its Digital economy and, is expected to be a $4 trillion digital economy. The governments of both these countries have made digital push a definite future growth avenue.
From the Digital strategic shift standpoint, I believe there are 3 most important areas of technology space – e-Commerce, Finance, and Entertainment. Here are some of the changes we can see materializing by 2025
Digital e-Commerce Conglomerates.
Walmart, Amazon, and Alibaba are the digital e-commerce conglomerate of the world. They not only have a presence across geographies but also provide services in multiple segments to their customers. Most of their e-Commerce business is yet to see the fruits of years of their efforts. Considering that they have a substantial base, expect them to start focusing on the customer base developed over the years. Marketing / customer acquistion cost (majorly deep discounting) which goes up to 40% of the overall cost will reduce considerably. Deep discounts shall become history. Instead, these organizations shall circumvent their users (customer base) by becoming a ‘One Stop Shop’ for all sorts of service. You need Music, You want to buy Groceries, or you want to make a banking transaction, all in one place.
This approach shall help them reduce overall marketing cost and know the customer better. Rather than trying to poach newer customers, cross-sell and Upsell would be the focus areas enabling the process for ‘One Stop Shop’ goal. Using advanced technologies like AI and ML, high level of customization and personalization will be achieved. The overall average revenue per user (ARPU) shall shift upwards with these tactics.
This scaling-up of business by the Big tech companies shall put further pressure on the small shops. Expect the small shop owners to face stiffer competitions in future.
The most attractive space in recent past years has been Fintech. Fintech VC investments have grown 120% to $39 Billion worldwide. Ant Financial has been at its pinnacle and is leading the Fintech space with glaring valuations. Post enabling the financial inclusion in the highly populated countries, expect Fintech firms to take the next big leap. Using hyperpersonalization, Fintech shall be able to create some beautiful user experiences. Internet of Things and instant analytics shall open up more opportunities to provide highly customized financial products.
Expect banks and non-banking organizations to go be aggressive for a digital push. The traditional banking setup of going to a bank branch shall become obsolete. More importantly, customers shall opt for a better experience over the nearest branch option. Though don’t expect the banks to go out of business, yet the new age firms shall eat away good pie of non-digital firms. P2P lending model, on the other hand, has not been able to take off so well, leaving hope and time for the old age banking model. China has seen many layoffs and casualties in this space already
Apart from the digital conglomerates like Prime Video and YouTube, there are some niche players like Netflix, Hulu, etc in entertainment space. These niche players shall continue to focus on their core business. However, there shall be stiff competition in this space since many startups could originate within this segment. Also, expect media houses to start looking at own digital business, similar to likes of Disney, opting to become an OTT player, rather than selling their content to various partners. Original content would be the USP for these niche players.
The entertainment space will see however major consumption uptick on introduction of 5G. Post launch of 4G the per capita data consumption has boosted multi-fold. Expect a similar uptrend with introduction of a speedier and reliable network.
What about Security?
While we talk about growth and rapid development, over the last few years, Security concerns with Digital ecosystem. Many secure system have been hacked in recent past. Your data may be safe today, however, there is no lifetime assurance on the same. Facebook, Microsoft, and Apple, in fact, have recently admitted to humans listening to some of the conversations. These are the organizations many have trusted to be secure and bestowed their trust.
Security standards will be met in the future either when these companies are broken down to smaller parts with stricter data sharing controls or one of the large techs goes down because of Security concerns. Though these are harsh and steep measures some organizations have started being cautious about data sharing. Google has introduced a Forget History, whereas, Apple has started promoting digital privacy as a campaign. Expect more security measure to be taken soon.
Image from Howden