18/2017 – Staying ahead of the curve

by Tan Thiam Hock

Saturday, 14 October 2017

THE older I get, the more difficult it is for me to change or to adapt to changes. Just ask my wife and she will not only confirm but add on additional truths that her husband has also become more stubborn, forgetful and temperamental.

It is because of the fact that she will be celebrating her 30th wedding anniversary next month that she has decided not to change her marriage status quo… as of now anyway.

Big telcos like Maxis have been going through major changes in the last 10 years. From providing mobile phone services with SMS services to provision of mobile Internet services currently. Going forward, the intense competition within the telco industry will lead to commoditisation of data services with compressed margins in a heavy capex business model.

Recognising this threat, the CEO of Maxis Morten Lundal, a well known telco veteran is taking Maxis through another transformation, this time going fully digital. From a paperless office to a clarion call for the employees to get on board the digital train or be left behind, Morten is fully aware of the need for this telco giant to change or to transform its business model.

Since the bulk of e-commerce or digital transactions will be conducted over mobile devices in the future, Maxis will have to up sell or plug itself into this digital ecosystem to stay relevant to its data consuming customers. The new digital services will provide additional revenue streams plus the high margins needed to justify the continuous capex investment into the unknown digital world.

On a similar note, Astro has been transforming itself from a subscriber based cable operator to a complete digital company selling customised entertainment content, e-commerce via home shopping and selling gaming and merchandise over cable TV and digital devices.

Henry Tan, COO of Astro and a media veteran, is fast tracking the transformation journey recognising the vast disruptions to its original business model.

The brick and mortar retail industry is facing tremendous challenges from a fast growing e-commerce tsunami of online consumers. As the biggest retailer of personal care and cosmetic products with over 400 personal care stores in Malaysia, Caryn Loh, veteran retailer and country manager of Watsons is stepping up online business via investment in a dedicated online team and a separate online shop. To counter the invasion of online purchases of Korean cosmetic products, Watsons shops now have a dedicated display of Korean offerings which is also retailed online.

There are many similarities amongst these industry market leaders. They have experienced leaders who recognised the forthcoming changes that will affect their existing business model. Though they are very successful and sitting comfortably on top of the heap, they understand that they will have to disrupt their existing model to stay ahead of the curve.

All these market leaders have an existing large customer base. Their new business model must not only continue to keep their millions of customers in transaction and engaged, it must be able to up sell new products and services with a higher margin and all this via a new distribution channel – the digital channel. The digital revolution will restructure every society in terms of consumption habits, employment opportunities and shift resources within the industry.

Market leaders who take the risk stay ahead of the curve. Previous market leaders like Kodak and Nokia (smart phones) that did not change when faced with new technology developments are no more around. In his presentation in an event earlier this week, Henry Tan of Astro put up a slide that says “Same old, same old is a RISK. Not taking risk is BIG Risk”. Chew on that.

My main concern with the digital revolution is how well will our SMEs cope with the changes in their industry? Are they even aware that disruptions are happening along their industry value chain?

If you are in the manufacturing industry, the digital revolution might not affect you directly. Are your customers disrupted? If yes, is there a need for you to go direct to your customer’s customer? Can your manufactured goods be sold online? Will it be a digital B2B, B2C or B2B2C distribution model? Or a combination? Or should you still stick to existing distribution model – selling to a disrupted importer/distributor who has no clue as to how to compete in the new digital world?

E-commerce is just another distribution channel option for manufacturers to go direct to consumers bypassing the distributor middleman or brand owners going direct to consumers bypassing traditional retail stores.

The Alibaba/Lazada DFTZ digital online platform will enable China factories to ship goods for storage in LCCT Sepang, DFTZ zone and Pos Laju direct to online consumers in Malaysia thus bypassing Malaysian importers, distributors and retail stores. The entire “import from China” value chain will be disrupted. For the entrepreneurs involved in this value chain, be afraid or as Morten Lundal puts it, ‘Be very afraid!’

Entrepreneurs of SME’s must identify the risk of disruption along their entire value chain. When you have a clear understanding of how your industry will be disrupted then only will you be able to change your business model or at worse scenario pivot out of the industry.

If the major corporations are reinventing their business model to survive in the new digital world, the SMEs being smaller and more agile should move faster to stay ahead or to be more creative with innovative solutions. In a constantly changing environment, the early birds who risk the unknown might just catch the juicy worms.

To those of you who are stubborn and resistant to change, be prepared to sail into the sunset like me. I assume you are ready for retirement, at peace with yourself and with not a care in the world on what your wife thinks of you. Welcome to my analog world.

Published: http://www.thestar.com.my/business/business-news/2017/10/14/staying-ahead-of-the-curve/#FS7AM3QJQhvl5dPe.99

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