Just how advantageous is being ‘digital’ in the current crisis?
- VERY advantageous if you are a tech giant
- Facebook, Apple, Microsoft, Google and Amazon are getting even richer
- But what about the tech ‘small but perfectly formed’?
It’s been obvious to most of us in this business - locked-down in front of our home screens as many of us are - just how advantageous ‘digital first’ business models were proving to be through the pandemic.
As customers we could could experience their advantages at first hand as our groceries arrived on our doorsteps after we had carefully chosen and scheduled them online; when our banks sent out our statements by email and snail-mailed our new tap and pay plastic cards to us so we wouldn’t have to lay even a finger on the physical bricks and mortar world should we have to visit it.
And as employees of service providers and equipment vendors we might be heartened by the degree of ‘digital first operations’ our companies had already adopted, making us confident that we would likely weather the Covid storm relatively unscathed, emerging to carry on our business where we had left off.
There was even a hint or two that, depending on how ‘digital’ our company’s business model had become, we might emerge with our competitive position enhanced.
Well, maybe. But we might feel far more confident of that were we working for some of the REALLY big ones. Small- and medium-sized companies - even if highly ‘digital’ - not so much.
Data analytics outfit, Global Data, has been looking at how well the tech giants have been steering themselves through the crisis and has found that Facebook, Apple, Microsoft, Google and Amazon (FAMGA) have reported revenue growth in the first quarter of 2020 while small and medium enterprises have struggled, it says.
“Given that consumers would continue to spend more time online during the pandemic-induced lockdown in some form through the end of 2020, these big tech companies will take advantage of their portfolio of digital platforms to sustain growth,” says GlobalData.
Well, yes. But highly digital smaller and medium-sized companies which rely on an ecosystem of other digital platforms (both large and small) must also have an advantage in terms of escaping the effects of supply chain disruption inherent in the physical world, at least as much as the big boys.
Perhaps the real lesson should be: “If a large proportion of all your operations and internal communications are (or could be) online and the same applies to all (or nearly all) of your partners, you’ll be in good shape.
Gigantism confers evolutionary advantages
There’s no doubt about how well the giants are doing though. Being big and wide-ranging enough to have commercial feet in both the physical and online worlds, they’ve been able to make up for losses on the swings through gains on the roundabouts. According to GlobalData, Apple (which up until relatively recently could be considered mostly a hardware vendor) has benefited from its new digital businesses. Says GlobalData:
“Confident of its long-term prospects, Apple registered a marginal increase in its revenue to US$58.3bn. Though the sale of iPhones declined, Apple saw the growth in subscription services such as television content streaming as billions were confined to their homes.”
“Despite its digital ads business taking a major hit in the last three weeks of March, Facebook posted nearly 18% growth in its revenue to US$17.7bn, mainly attributed to the lockdown and the effective work from home substantially increasing the traffic for its video calling and messaging applications.”
“Recorded a 15% growth in its revenues to US$35bn fueled by the growth in its cloud business. The company saw an uptick in the usage of its remote communication platform Microsoft Teams, cloud computing service Azure, and Windows Virtual Desktop services.
“The parent company of Google, posted a 13% growth in revenues to US$41.2bn. Despite the slowdown in its advertising business, Alphabet witnessed increased revenues for its G Suite, a part of Google Cloud, YouTube, and Pixel products.
“Recorded 26% growth in its revenues to US$75.5bn, backed by its digital businesses such as Amazon Web Services (AWS), Prime Video, and Fire TV that saw a huge surge in terms of both usage and subscription numbers. In contrast with other tech giants, the company’s advertising business revenues were up by 44% suggesting the usage of advanced machine learning algorithms to drive better ad relevancy.”
So as expected the tech giants have done well out of Covid confusion and lockdown. But we suspect that many smaller and medium sized businesses may have done just as well if they were able to hook online activities. Next stop will be to report on some of those.
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