Transforming the Business Landscape
Disruptive technologies have changed the way companies create products and services, interact with customers and in general, run their business. As a result, Noah Wintroub, Global Head of Internet & Digital Media Investment Banking at J.P. Morgan, believes all companies across sectors are Internet companies in today’s environment.
Disruptive technologies have tremendous impact on transforming business from the infrastructure to customer experience. For instance, the declining cost in information processing already has displaced established products and services. “Low-cost IT has fundamentally changed the way that we consume, the platforms and the places where we consume, and the business models based on that consumption,” says Wintroub.
As a result, the wall separating so-called traditional and Internet companies is an artificial barrier and one that fell long ago. The real divide instead lies between companies whose technologies and business models are disruptive and those whose business models are likely to be disrupted. Disruptive companies are attuned to the changing world surrounding them, fluent in technology and capable of evolving in real time. Disrupted companies are often those older, established organizations that do not reinvent their business models nor adapt to changes in the competitive landscape.
Underlying secular and cyclical trends have added impetus to the disruptive technologies. From a secular perspective, less capital is needed to start a company nowadays, given the broad range of computing infrastructure and services available on the cloud. And from a cyclical standpoint, the cost of capital is near a historic low, which allows disruptors to build fortress balance sheets by financing themselves at low costs now for the long term.
Consequently, the competitive dynamic has changed. “Being the incumbent company is not as advantageous as it used to be,” says Wintroub. The landscape now includes ever more players as new competitors emerge. The pace of technological change is moving so rapidly that the period of competitive advantage has shrunk dramatically.
To thrive, companies must be more proactive, consumer-focused and nimble. “Figure out the business you’re in and who your customers are. There’s a lot of magic in incumbency, but it doesn’t give you the right to be the market leader for very long. That right is earned every day by reimagining what you do and making sure you’re doing it the right way,” he advises.
The impact of disruptive technologies on the capital markets goes deeper still. “Three of the five largest companies in terms of market capitalization currently are technology and Internet companies,” Wintroub says.
However, he emphasizes, equity valuation is never absolute: the stock of a company is never perfectly priced. “Your stock will always be either to high or too low, since it’s a function of several things,” says Wintroub.
Instead of using stock prices to measure success, he recommends that companies prioritize long-term growth and plan ahead for periods of high risk and volatility. “What we say to companies is focus more on the outcome you want,” he adds, “and then figure out what financial tools and products are available for you to solve your problems.”
Mobile: The ability to stay digitally connected while on the move means no longer being tethered to a stationary location
Social: Group platforms enable data sharing across individuals and their networks, changing the way information is consumed
Big Data: The ability to leverage vast stores of unstructured data produces real, actionable items
Real Time: Real-time delivery of information creates new expectations
Cloud: The migration of local data to remote servers on the Internet increases the amount of data storage, while cutting costs
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