“Traditional Businesses” Need to Re-Evaluate Their Cultural and Operational DNA as They Navigate a Disruptive World
Oracle is a modern-day powerhouse that provides essential elements for companies to pioneer innovations and drive new business models. Oracle has a rich history of helping customers develop roadmaps, migrate to the cloud, and take advantage of emerging technologies from any point: new cloud deployments, on-premises environments, and hybrid implementations. Oracle’s approach makes it easy for companies to get started in the cloud and even easier to expand as business grows. As a result of this, many traditional, brick-and-mortar companies are relying on Oracle to help them embrace the “buzz” of digital transformation and build their strategies to stay relevant in this disruptive digital economy.
Data & Storage Asean had the pleasure of speaking with Samina Rizwan, Oracle’s VP for Key and Lead Accounts for ASEAN and South Asia Growing Economies (SAGE) to tap into her experience and understand just how traditional companies are coping with the disruptors that are eating into their markets.
Just How Do Traditional Businesses Cope and Compete With Disruptive Players Entering the Market?
According to Samina, the harsh reality about today’s disruptive market landscape is the fact that the entire competitive landscape is changing. She explained that in the past, boundaries in and between industries were clear. As an example, for a bank, their competition was other banks, but today that’s no longer the case. Competition for banks can be any fintech company or a telco that has acquired a banking license. (Note from editor: Think of the various digital wallets from non-banks that you may be using each day).
The landscape has also changed from local to global, with technology enabling global reach to even smaller players and also allowing customer profiling and understanding on a level that was not possible before.
Finally, according to Samina, the other major change in the whole competitive landscape is the customer profile. Target customer bases are increasingly made up of millennials who have high disposable incomes, live their lives and run their businesses in a completely different way from the traditional customers that traditional businesses have been serving.
“A Traditional Business Will Not Be Able to Compete Unless They Change Their DNA”
Given the fact that Samina sees this seismic shift in the competitive landscape itself, it's not surprising that she points out that traditional businesses need to dig deep and make fundamental changes to stay relevant.
Samina stressed the notion that traditional business must “change their own DNA to deal with a younger, more demanding customer base.” They must change their DNA to become more agile and more responsive and look into their DNA to see whether they can reinvent themselves. If traditional businesses do not change these things in their DNA, then Samina believes they will not be able to compete.
It’s Important to Define What is a Traditional Business
For companies to transform, it is important to understand where they are starting from. Samina gave some very clear definitions of what constitutes a traditional business – something we believe is critical to understand for companies that want to look into their DNA and make changes.
First, Samina sees traditional businesses as “ownership businesses” with high sunk costs and significant capital investments. These high CAPEX companies make very different decisions to companies built on OPEX.
A side effect of highly capital-intensive businesses is that they tend to be “lethargic” in the ability to act; they lack the agility of a new age business. By way of example, Samina points out that where a traditional business may take weeks to launch a new product, new age business can do so in half a day.
Lastly, Samina sees that traditional businesses spend large proportions of their budgets on costs or operations as opposed to new age businesses that spend much larger percentages on innovation.
“Know Your Customer”
Outside of the operational differences between traditional and new age companies, perhaps the most important difference that Samina highlighted is how the two perceive and understand their customers. New age companies are built on technology that consumes data. As a result, they can understand customers on a new more personalised level.
Samina explains it like this, “Traditional business look at ‘product out’; new age businesses look at ‘customer in’. They see us as customers with context. They understand our family, our hobbies, possessions and interact with us based on these elements, whereas a traditional business such as a bank sees us as a user of a mortgage loan or credit card or an account.”
From an Oracle perspective, when Samina is assessing the companies she interacts with, she questions whether they have embarked on their journey to cloud as it allows them to move on from some of the shackles that are holding traditional businesses back. It does not matter what stage of the journey the business is at, or whether a milestone has been arrived at or not; what matters is whether the executive has taken the crucial decision to embark upon the journey to cloud because, from there onwards, it is a matter of strategic planning and tactical execution.
The question is important because what Samina sees very clearly is that we are “sitting at the cusp of change”. This being the case, traditional businesses have no choice but to start their own journeys.
“Digital Disruption Is Under Way”
This change is fundamental. The digital element has not just changed business; it is changing our everyday lives in a very disruptive way. As Samina puts it, “Every function in life exists the way it always did, but there is a computer – a “platform” as we call it – in in the middle running a service in the cloud.” Ride-sharing is a perfect example of this. We always had people that wanted to get from A to B and drivers that wanted to take them there, but putting a technology platform in the middle of them has transformed an industry by driving massive efficiency in supply and demand.
Her point is clear. The needs of the traditional business remain the same, but the disruption comes “by placing a technology platform in the centre of it. The disruptive players in the market are native born into digital technology; they use technology to build business platforms that could not exist without this digital technology.”
“Without That Disruptive Agility, Traditional Business Will Die and New Business Will Take Over”
The pace of technology adoption is also something that adds to the disruption. Samina points out how modern technologies like smartphones have achieved global adoption in under five years as opposed to electricity which took 30 years just to get to 10% consumer penetration. Her point is that the speed at which disruption is occurring is another factor that can catch traditional companies cold.
The Millennial Factor
Samina felt it was imperative to bring the conversation back to the changing consumer landscape. She pointed out how rapidly millennials are becoming the largest group of consumers for businesses to target. A survey by Yahoo revealed that millennials would account for $1.4 trillion of spending power by 2020, making them the single largest consumer segment in the US. Given that many other countries boast large populations with at least 50% being 25 years or less, the focus consumer segment globally must inevitably be millennials native born into digital technology.
According to Samina, the impact of the millennial market segment cannot be underestimated. They are young with high earnings. There has never been such a large number of new entrants into the market (in such a short space of time) in our history, and they act differently. They have been born into the digital age. Being native-born into technology, Samina contends that millennials are very demanding. “They have short attention spans. You will notice a video on social media that runs more than five minutes won’t get many likes. They have little patience compared to a traditional customer. If you don’t give them immediate good service, they will simply change their bank or change their service provider. This basically means that if they cannot run their life on mobile apps which are speedy, agile, highly secure, and intuitive in use and response, they will simply not engage.
Given the size of the millennial market segment, businesses cannot ignore them. To this end, Samina explained that the millennial element is key to the traditional business transformation process. “The millennial market segment is a digitally informed entity, and unless you are speaking to them on their terms, you are not going to find their business.”
Three Things Traditional Companies Must Do to Survive Digital Disruption
With the challenge of dealing with disruption being so fundamental, we wondered if Samina could share what she felt were the three most important elements that traditional businesses should focus on as the markets change around them.
Number one for Samina is the urgent need for traditional companies to understand their customers much better than they did before. Second, they must be agile; this means being quick to market. They can’t delay new products, offerings and services. Finally, they must switch from a CAPEX to OPEX cost model
Samina couched this in Oracle terminology. She told us that within Oracle, they see two critical success factors for businesses moving from being a traditional player to a digital business. One is the inevitable move from legacy to cloud. Oracle defines six different journeys to cloud, but without a doubt, businesses wishing to transform must be on one of those paths. The other success factor is to utilise the AI and machine learning elements of technology and using this to build an autonomous IT environment. These two things allow a massive transformation. A major example is that instead of spending the majority of their time and money, perhaps as much as 80%, on operations (i.e. keeping the lights on), businesses can put the majority of that spend into innovation.
Customers are Already Convinced They Need To Go Digital, But They Are Unsure Of The Details
In Samina’s experience, Oracle customers do not have to be convinced that they need to go through a transformation journey. However, where she sees they need assistance is on understanding what digital transformation means. This is not the same for everyone; each company and industry is at a different stage on their journey. To help define this stage, Samina tells us that they need to conduct an “As Is, To Be” discussion and assessment. In other words, “where are they and where do they need to be?” Understanding “how digital they need to become” is also critical as it is different for every business.
One area that organisations worry about as they digitally transform is their trust in cloud. Samina has come across many questions here, such as, “Will they see the returns?” and “Can they trust the security?” Samina states with confidence that “Oracle has a great story to tell here” and with the company’s track record, Oracle can give customers the confidence to move forward with cloud.
Interestingly, often the CIO’s team expresses the greatest concern vis a vis transformation of businesses through digital technology. Understandably, they worry about redundancy of their existing investments, security of data and processes, and re-skilling of technical resources. According to Samina, this is “a conversation that Oracle likes to have because we can prove, with statistics and references that the benefits of embarking upon a cloud journey comprehensively outweigh any perceived disadvantages”.
The Good News is The OPEX Model
Samina explains that the OPEX nature of cloud makes the financial considerations for investing in digitising the business much easier. In her words, “It is difficult to justify a high CAPEX, but it is much easier to justify a modest recurring OPEX, and this is exactly what cloud does for you.” In short, the economics and OPEX aspects to cloud make the ROI for digital transformation compelling and can help to convince customers to take the journey.
The Technology Comes at the End
For Oracle, Samina feels that the transformation journey starts with discussions around the business, the market and the ROI that change will deliver.
To bring it back to Samina’s original point, traditional businesses need to look deep into themselves and change their DNA, and it seems to us that Oracle’s discussions and advice for their customers start with this dialogue. According to Samina, once these discussions have occurred, plugging in the solutions and technology to facilitate the journey is the easy part.
To find out how Oracle can help your business in its digital transformation journey, visit Oracle OpenWorld Asia from March 26th to 27th in Singapore. This article is sponsored by Oracle.