Back in 2015 a media executive at advertising giant Havas made the following observation: “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”
While some of the detail in that quote may have changed in recent years – not least in 2017 Facebook started making its own content – the basic sentiment holds powerfully true. We live in a world where traditional businesses are being severely disrupted and may cease to exist altogether.
Simple and transparent
Five years ago, Sir Martin Sorrell, CEO of the world’s largest advertising company, WPP, wrote in the company’s annual report: “Retail giants like Walmart, Tesco and Carrefour continue to focus on leveraging their buying power on a global level, even as they suffer issues of their own. Legacy retailers face pressure from online retailers. Amazon is a threat to all.”
Back then, Sorrell saw digital technology as a threat for retail, transportation and fast-moving consumer goods (FMCG) companies, but an opportunity for advertising. Sure enough, the share of WPP’s revenues from digital activities has been increasing, but that was not enough to protect it from an 11% fall in August. Rather than creating opportunities to add value, the so-called ‘digital complexity’ has become digital efficiency, transparency and simplification, leading some companies to bypass advertising agencies and bring their marketing in-house.
In the face of the onslaught, CEOs have been dedicating entire pages of their annual reports to disruption and how their own technology strategies are built to combat it. Yet, even the grocery industry, which had long managed to fall outside of Amazon’s reach, can no longer escape its grasp following its $13.7 billion purchase of Whole Foods.
Weathering the storm
But even in a disruptively deflationary world there are effective strategies for success. The companies best placed to weather the digital storm are those that have identified their lifeboats and are firmly on board. Those lifeboats include:
Established brands that are able to generate a short-term buzz without losing long-term effectiveness, such as the return of all-day breakfast at McDonald’s, or Estée Lauder’s suite of high-end brand names commanding a quality premium.
Not only the obvious technology companies like chipmaker TSMC, Chinese e-commerce giant Alibaba and cyber-security firm Check Point Software, but importantly those that embrace disruptive technologies in their own sectors. Sensata makes the sensors needed in autonomous driving, Publicis has the largest exposure to digital marketing services of its peers, and Pearson has shifted its entire service offering from print to digital.
Service-led companies with human advice and interaction that cannot be replicated by Alexa – the employees at Halfords will assemble your child’s made-to-measure bicycle that you ordered from them online.
If Amazon is making waves across sectors, it is up to the businesses (and their leaders) to ride them, and if all else fails, these three strategies could help them stay afloat.