Digital companies go their own way

A post office owner is building electric cars. An online retailer is developing drones. Smartphones are making payments.

The digital world is enabling new combinations and permutations of business that would never have been possible – or even thought of - before. Even five years ago, no one would have envisaged a postal service like Deutsche Post DHL would be designing and building its own cars and drones for delivery services. The idea that Africa could lead technology and usage for payments using a mobile phone would have been thought crazy.

Significantly, these types of strategies are possible only in the digital world, the world of software. The basic rule of the digital world is simple: Become digital, or have a dying business model and even dying company. There is no way to avoid this natural law in modern digital societies.

Any classic company, regardless of its focus, must deal with two major threats. The first is a loss of competitiveness to any competitor that masters the transformation to the Digital Enterprise in its industry sector and gain huge costs and efficiency advantages. The second is that competitors will provide a digital customer experience that attracts own customers to change to the new player.

In the case of Deutsche Post DHL, the organization will use its self-built electric cars and drones to improve logistics, lower energy costs, and contribute to reduce the carbon footprint.

This is good news for Deutsche Post DHL, the society and the environment in total, but also good news that large established companies can master the challenge of reinventing itself as a Digital Enterprise, step by step. The first step is the beginning of the transformation journey – to paraphrase a Chinese proverb. As a result of this transformation process industry lines are being redrawn. This is also changing the competitive landscape in three fundamental ways: It generates competition from so called “digital natives,” “digital babies” and “digital phoenixes.”

In the past decade, a number of digital natives such as Google and Amazon have transformed other industries. To cite one prominent example, Apple has reshaped the music and mobile phone industry. Netflix has similarly reconfigured the video and TV markets. Meanwhile, Amazon has reshaped the retail industry and is also looking to transform datacenter infrastructure markets with its cloud services. Samsung and LG, better known for their TVs and mobile phones, are poised to take over leadership of home appliances from traditional providers like Whirlpool and Electrolux.

 New startups - the digital babies - that take advantage of technological changes are emerging as another form of competition in every sector. For example, GPS devices from Garmin and other manufacturers are experiencing competition from mobile navigation apps on smartphones, live traffic reports and other enhancements offered through auto companies.

Technology is also allowing many incumbent enterprises to redefine themselves. In some cases it even enables them to emerge from oblivion as digital phoenixes. Deutsche Post DHL transformed itself from a national mail carrier into one of the largest global logistics companies by acquiring DHL, Van Gend & Loos, Exel, Airborne Express and other delivery services and by making prudent investments in new technologies. Producing their own electric delivery trucks and bringing parcels up in the air with drones will be another chapter in their transformation process.

These examples show that businesses must develop new mechanisms and strategies to respond to the new digital environment. In doing so, it becomes clear that new technologies are a key enabler for new success stories. Digital players therefore become major threats to classic companies by steadily redrawing industry boundaries. They can defy the shackles of analog and take another route - the digital way - to success.

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