Technology

The phenomenon of digitization has expanded its impact broadly and deeply across all industries. Digital value chains, e-businesses, smart products, smart machines, and the “internet of things” have disrupted brick-and-mortar businesses and continue to shape new business models thanks to consumer pull and technology push. Given the large economic benefits, the digitization mega-trend is poised to expand as vast amounts of capital continue to pour into digitization technologies.

This takes the form of continuous technological advancements, process improvements, new computing platforms, leading edge applications, innovative combinations of technology, and ultimately new products. The resulting effect on the industry is one of increased complexity.

Companies are driven to move at increasingly faster speed in order to stay ahead of change. They do so to get to market faster, keep in closer alignment with evolving consumer demand, focusing on flexibility and responsiveness, and in so doing, building competitive time advantage. The net effect is once again one of increased industry complexity.

New firms are entering the global field from emerging economies, particularly India and China. Low-cost/high capability competitors are expanding into the world’s market by arbitraging low-labor cost. Others adopt aggregation strategies: i.e. building global volume off a common platform to derive economies of scale worldwide. These conditions cause important large geographical shifts for Western industries. As a result, companies need to adapt to a new form of change and higher levels of competitiveness.

In the context of limited resources, globalization, the speed of competitive moves and technological advances, firms forge alliance networks: intricate business relationships among corporations to leverage each other’s resources through joint efforts. The temporary nature of collaboration from alliance networks makes for maximum strategic flexibility. However, alliance networks lead to inherent instability and inevitable change.

While new technologies push the industry boundaries to the leading edge, older technologies eventually progress to maturity in their life-cycle spectrum. This condition gives rise to well-known forms of industry behavior and classic axes of competition. These are incremental product improvement, customer micro-segmentation, increased competitor concentration, fierce price competition and further geographical market outreach.