Think Tank

Changing the Rules of the Game

In conversation with Vikas Choudhury, President of Reliance Jio

Advances in technology are transforming business processes and disrupting business models. Today, five technology firms account for half the combined valuation of the S&P 500. Very few companies that were on the S&P index in 1950 even exist today. The average tenure of businesses has dropped from 30-35 years in the 1960s, to 20 in the 1990s, and is forecast to fall to 14 years in the next decade. Essentially half the top 500 firms will get churned in this period. Add to that, over 70% of market capitalisation now comes from intangibles, which include the brand, the customer experience, and, most critically, data. Uber, for example, has become the world’s largest taxi company, but owns no vehicles. Facebook owns no content, Alibaba no inventory, and Airbnb no rooms. Netflix has disrupted its own business model several times, and now relies solely on analytics to drive its growth, and on popular opinion to generate content. Closer home, Reliance Jio has upturned the conventional growth model in telecom. It already accounts for 70% of India’s 4G data usage, scaling up to 100 million users in a mere 170 days. It has enabled frictionless transactions: its SIMs are activated in just 7 minutes thanks to thumb-print scanning and real-time connectivity. Viewed from a distance, these various examples yield 5 key takeaways on how the world of business is changing.


Google embodies the ‘winner takes all’ model…






…as does WeChat

Winner takes all
Being a successful first mover counts more today than it did ever. Google runs 40,000 searches a minute – over a trillion a year. It is the only company in the world to have 7 platforms with over a billion users each – Gmail, Chrome, Search, YouTube, Android, Play Store and Maps. What enabled its success was one simple insight: until Google came along, there was no ID system common to the world’s people. Now, to make effective use of any Google service, one only needs to log in with a Gmail address. This alone allowed it to capture almost the entire market. WeChat takes the winner takes all principle to a whole different level. Elsewhere, there are separate apps for different purposes but in China, WeChat handles almost everything – from search and advertising, to messaging, payments, and a myriad of services. With a billion users, it hosts 38 billion messages a day and 700-800 million people use it for payments. In fact, there are many things – including buying items at a vending machine – that one cannot do without WeChat. Going forward, voice-based applications such as Alexa (which already has over 30,000 use cases) will dominate. A sixth of US households already own such devices.


The luxury of time is long gone…




…and scale has to combine with speed to succeed

Scale @ speed of thought
No longer do organisations have the luxury of taking 10 or 20 years to build out a business because they are likely to become outdated far sooner than that. Spanish fashion brand Zara killed the 40-week cycle that previously dominated. It employs 3,000 trend spotters to walk the street across the world and observe what people are wearing. The feedback they give quickly factors into design and it takes no more than 15 days from spotting a trend to it finding its way into Zara shops. The company releases 12,000 designs a year, and the average Spanish shopper visits a Zara store 17 times a year. In just 80 days, augmented reality app Pokemon Go was downloaded 550 million times, generating USD 450 million in revenue. In India, food-delivery app Zomato went from 800 riders to 80,000 in just 10 months. In the US, Instacart has managed to attract 50,000 people across hundreds of cities, each willing, at short notice, to buy and deliver small items (a loaf of bread, a carton of milk) to nearby consumers.


Removing the inconvenience factor from purchases

Frictionless experiences
Human-computer interactions are becoming seamless and so must transactions. Amazon’s Go stores have no checkout lines because users simply put things in their basket and walk out. The Dollar Shave Club disrupted the shaving products market thanks to a simple realisation: Men need to go out to buy blades every month, so why not do away with that need by turning it into a subscription service? Elsewhere, with the gig economy taking a firm hold of the job market, enablers like WeWork have virtually carved out a whole new industry.


In an always-on world, real-time decisions are imperative

Realtime decisioning
There are now 30 billion IoT devices across the globe; Facebook sees 1 million new posts a minute; self-driving cars, which make decisions on a continuous basis, are a reality; and platforms like Kensho are capable of sieving through reams of data to arrive at answers, all in real time. What this implies is that, in order to generate optimal results, business leaders must be able to make split-second decisions on their feet – and not always in the comfort of the Boardroom.


In an always-on world, real-time decisions are imperative

Realtime decisioning
There are now 30 billion IoT devices across the globe; Facebook sees 1 million new posts a minute; self-driving cars, which make decisions on a continuous basis, are a reality; and platforms like Kensho are capable of sieving through reams of data to arrive at answers, all in real time. What this implies is that, in order to generate optimal results, business leaders must be able to make split-second decisions on their feet – and not always in the comfort of the Boardroom.


The future will be about paying on the basis of what a product yields

The economics of outcomes
Pricing today is no longer so much about the product itself but the outcomes it generates. Rolls Royce aircraft engines are embedded with thousands of sensors that are ‘talking’ in real-time to multiple other devices, yielding valuable predictive analytics data. On the whole, Rolls Royce is moving from a capex to a leasing model, and is paid per flying hour. 52% of its revenue already comes from services. Uber made possible the idea of surge pricing, which is determined by the balance between demand and supply. The customer’s willingness to pay – determined by who they are, what the weather is like, or whether they have, say, just left a pop concert – determines their price elasticity, and the same holds true on the supply side. It is in surge pricing, and not the low-end Uber Go fares, where the real money is to be made. Meanwhile, even in healthcare, outcome-based contracts are coming into play. For example, a portion of the reimbursement paid by an insurer for an insulin pump might depend on how the patient responds to the device.