There have been three major technology disruptions that have transformed the business models of the time – the steam engine, electricity and the phone. Now, we’re on the cusp of a fourth - digital disruption.
The core technology components of this disruption are computing, storage and bandwidth and the rate of development and innovation being built on top of these across so many industries is changing the business landscape and shows no sign of slowing down.
As a result, established market leaders and incumbents are being toppled. By not adapting, what were once the strengths of an established market leader are suddenly its weakness and their fall is swift. An on-going project by Deloitte in the United States called the Big Shift provides fascinating insights on this.
One of the big changes brought about by digital disruption is in the relationship between consumer and business. For generations, business has owned that relationship by being able to dictate opening hours, being destination driven with brick and mortar outlets and controlling the development and availability of new lines and products. But no more.
Now, with the world just a couple of clicks away on an internet-enabled handset or tablet, consumers have control. They can research what they like, where they like, when they like. They can choose their source of information, peer reviews over brand marketing, buy international over local, vent their frustration at a business in 140 characters or less and have made the court of public opinion a formidable arena for unsuspecting businesses, no matter their size.
And with all this, digital disruption is reducing the barriers to entry and giving rise to new business models. The more successful of these new models have brought technology and people together to deliver a new experience in an easy to use way.
Take Uber for example, the San Francisco venture funded start-up that launched in 2010. Using a mobile app you can order a driver to pick you up and track the progress of the ride in getting to you. At the end of the ride you can pay without cash because your details are already stored and you can rate the driver and the driver can rate you.
Uber is now available in 128 cities across 37 countries and is throttling the taxi industry in many of those places. In June it announced $US1.2 billion in funding in its latest round, which values the company at around $US17 billion.
Airbnb is another example of mobility and customer uptake turning a traditional business model on its head. From apartments and rooms to tree-houses, boats and 600 castles, Airbnb is offering accommodation to rent in 34,000 cities and 190 countries, including New Zealand, all via your mobile device.
Founded in 2008, Airbnb is now valued at $US10 billion, a higher market capitalisation than the Hyatt Group ($US 9.5 billion), which started business in 1957 and this year Airbnb was voted among the top 100 companies to work for. By 2017 it is estimated Airbnb will surpass the Hilton chain of hotels that was established in 1943 and now boasts more than 500 hotels in 78 countries with a market capitalisation of around $US 23 billion.
Banks around the world are reacting in different ways and at different speeds to digital disruption. It seems inevitable that there will be casualties. Thankfully, at Westpac New Zealand, we’re on the digital wave and committed to the ride.
The last 18 months or so there has been a sea change in our focus with the customer, and their new needs and behaviours, front and centre of everything we do. We watch global trends, visit hubs of innovation such as Google and Apple and forge partnerships with likeminded businesses such as Samsung and MasterCard.
Customers want more control over the transactional side of their banking, 24/7 access to their cash, to originate loans via a mobile device and to video link to a subject matter expert from their tablet for advice at a time that suits them and a whole lot more.
Yes, finances are one of the most personal aspects of our lives and banks have an enviable level of trust with customers as a result, but an equally long standing saying comes to mind…change is the only constant in life.