Who are my competitors in the Digital Transformation

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Competition is like a force of nature where there are always competitors out there eating up your market share. Digital Transformation has forced us to rethink about competition because since the Internet opened a new realm of virtual existence where the traditional business model and the definition of competition have changed dramatically. Sometimes the boundaries are blurring and shifting. In the conventional world of trades, everything seems to be linear where the business model is a monolithic stack of supply chain partners, sales channels, distribution networks, and customers. However, the level playfield becomes different and dynamic as if it adds another dimension to the new commerce structure in the digital age.

There seem to be two forces of business strategy in the play for established businesses and digital-first businesses.  Digital-first companies are like Netflix, Uber, Airbnb, where they do not have existing baggage like the established business, so they focus on creating holistic digital organization.  The digital-first organizations can be very productive in terms of their processes, people, and structures.  All they need is to build a digital solution like an app that does everything.  Consequently, the process of Transformation Digital is irrelevant to them because they were born in the digital age. 

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The established businesses face many challenges. The traditional competitors still exist, and new competitors arise from the digital-first businesses. For example, HBO is a television network company that competes with other network companies like Showtime and AMC. When Netflix came into the market, it was a different competitor when comparing with the traditional competitors since there is nothing in common regarding business model, except they compete for the same customers. To HBO, Netflix is stealth and not under the radar by any means, and it is an asymmetric challenger who has a different pricing model, and it lacks distribution partners like cable companies to worry.  The competition gets worse since besides competing for the same viewers, they now even fight for their talents like content writers, production team, and actors/actress.

HBO has to reinvent its business model to respond to its innovative competitors.  First, in order to compensate for the reduction of its pay subscription, HBO creates its own over-the-top (OTT) service, HBO Go.  Second, it attempts to keep traditional customers’ habits of getting the content from current cable-TV as before. To prevent the internal competition between the HBO GO and its cable subscription, the strategy marketed toward customers who do not own a cable TV package at that moment. Third, HBO continues to negotiate and strengthen with its distribution partners like cable companies: Comcast, Spectrum, Verizon Fios, Direct TV, and DISH. Lastly, it adds other OTTs like Amazon Video, Hulu, PlayStation Vue, to its HBO GO platform.  In the end, HBO also needs to be prepared for the business as if the transition to the OTT service is inevitable and permanent. This possible result parallels to what Microsoft chief Satya Nadella said that every business will be a software business.

From HBO’s Digital Transformation strategies, we can see that the changing dynamics of competition and interfirm relationship as it becomes a combination of competitive and cooperative relation called “Co-opetition.” This idea coincides to what we observed in Digital Transformation that the boundaries and concepts of competition become blurring. 

The idea of Co-opetiton [a combination of cooperation and competition] becomes more intimate as we saw the creation of Open Data Initiative during 2018 Microsoft Ignite event where Microsoft, Adobe, and SAP come together to unify the data model so that they can share the asset across system seamless.  In this way, customers can experience another level of convenience and in-depth insight into their data, instead of depending on intermediaries to extract value from one data model to another. In contrast to traditional business model, key assets now reside in outside network instead of holding inside the firm, and this is another characteristic of digital transformation.

In the digital age, competition is everywhere in 3D and cooperation is also omnipresent. Sharing assets and customers become a norm while the roles of competition and cooperation are continuously shifting. Realizing what true values the business can deliver is more important than ever, and as long as potential partners can assist the business to reach the vision and strengthen the values, there is no competition after all. To the untransformed companies, all of a sudden, everyone becomes the competitors.

If you have any thoughts about the roles of competition and cooperation or the article, I would love to hear what you have to say.Thank you for reading.