This is the first industrial revolution powered by software. All others before this were hardware driven, for example, the steam engine and automotive, and by virtue of that, the progress cycles were lot slower. By its very nature, software has rapid development cycles, it is very adaptable and scalable and requires relatively less marginal cost. So success and failure in the era of abundance is rapid and polarised.
The era has been marked by businesses using digital to make their supply lot of more efficient and productive. This has led to supply being greater than demand which then has led to an exponential reduction of prices in the sectors of the economy where digital has played a great role. Unfortunately, we are still living in the era of scarcity in some of the key sectors like healthcare, education and energy where digital hasn’t had a great impact leading to an exponential price rise in these sectors.
This has changed the law of diminishing returns to increasing returns, where network effects result in making sure that businesses became more valuable as more and more people, both on the supply and demand side, use it more.
The era of abundance has also been signaled by more people getting into the middle class and more middle class people buying premium brands - therefore increasing the share of consumption in the GDPs of Asian economies.
Therefore, giving rise to new business models, new supply sources and new customer experiences. Products have become services, price is an exchange of value and the place has given way to a context for commerce.
The fundamental rules of winning are different in the era of abundance and scarcity, for four reasons:
- In the era of scarcity, businesses protected their profit margins by making incremental improvements to their products. In the era of abundance, businesses are being forced to cannibalise their high-margin, core business in order to create moats, and mitigate the risk of disruption. Kodak, which was the first inventor of the digital camera, is a poster child of how not wanting to reimagine the core business can lead to rapid disruption.
- In the era of scarcity, businesses could get away with large investments in the supply infrastructure, and under-investing in areas like product development and customer experiences. In the era of abundance, owning and and looking at the business through the lens of customer experiences is the path to success.
- Businesses, in the era of scarcity, could win despite designing solutions that were searching for problems to solve. However, because supply is greater than demand in the era of abundance, businesses are being forced to solve neglected problems and meet unmet consumer needs.
- Because demand was greater than supply in the era of scarcity, businesses focussed on digitisation (digitising physical assets) and digitalisation (optimising efficiencies with automation) to expand their supply. In the era of abundance, businesses are being forced to look at transformation as a complete strategy to reimagine their core, design new business models and revenue streams.
In this era, businesses need to follow a 2-speed strategy of strengthening their core business as well re-imagining and getting ready for the time when their core will no longer be meaningful. Technology is not a disruptor in most cases, business models are as they create disruption. Technology simply impacted on the speed of disruption.
Ultimately, businesses should stop obsessing over being better because that approach is about optimising what they already have. Businesses and brands need to pivot their passion for better, to looking at new and different ways to solve customer’s neglected problems. Hovis and Lloyds Bank are just two brands to have done this already.
The era of abundance has opened a level playing field between big incumbents and tiny disruptors. Winning is lot easier, but so is losing. The key is to surviving is to discard the rules of the era of scarcity and reimagine the rules for the era of abundance.
Sandipan Roy is chief strategy officer (CSO) at Isobar Asia