{"id":34065,"date":"2023-01-03T12:42:56","date_gmt":"2023-01-03T12:42:56","guid":{"rendered":"https:\/\/digileaders.com\/?p=34065"},"modified":"2023-01-03T12:42:56","modified_gmt":"2023-01-03T12:42:56","slug":"the-digital-economy-in-2023-and-bigtechs-search-for-digital-renewal","status":"publish","type":"post","link":"https:\/\/digileaders.com\/the-digital-economy-in-2023-and-bigtechs-search-for-digital-renewal\/","title":{"rendered":"The digital economy in 2023 and BigTech\u2019s search for digital renewal"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">It\u2019s always fun to look ahead at the start of a New Year to imagine what we\u2019ll encounter. But it can also dangerous. Turn the clock back 12 months and we were so sure of what was to come. Despite the drastic impact of the pandemic, there was a great deal of hope that we had turned the corner in managing its impacts. Vaccines had been released in record time. Systems and supply chains were evolving to drive greater agility for businesses. Many adjustments in lifestyles and working practices has been accepted as \u201cthe new normal\u201d. Consequently, despite the obvious challenges, there was a good deal of optimism for a fast-paced recovery on the road ahead.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In particular, <\/span><a href=\"https:\/\/dlab.berkeley.edu\/news\/surprising-role-digital-technology-during-covid-19-pandemic\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">many people were particularly bullish<\/span><\/a><span style=\"font-weight: 400;\"> about the role that digital technologies had played in helping organizations and individuals to re-adjust to the challenges thrown up by the pandemic. We had not only survived: <\/span><a href=\"https:\/\/www.forbes.com\/sites\/forbestechcouncil\/2020\/12\/18\/industries-thriving-during-the-pandemic\/?sh=5b43ac1c7a03\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Many digitally transformed organizations had thrived<\/span><\/a><span style=\"font-weight: 400;\">. Due to the on-going digitization of core systems and services, large parts of our infrastructure were able to continue to function through a combination of hard work, distributed management, online service delivery, and remote collaboration. There was even talk of the state of a \u201c<\/span><a href=\"https:\/\/www.forbes.com\/sites\/forbestechcouncil\/2021\/04\/07\/digital-transformation-is-coming-of-age\/?sh=7ba7591a74ee\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">golden age<\/span><\/a><span style=\"font-weight: 400;\">\u201d for digital transformation.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, in reality the past few months has revealed a much more complex digital transformation landscape. In practice, 2022 was very tough for the digital economy and many expect an equally challenging 2023. Undoubted successes in ensuring organizations could maintain high operational levels through the volatility we faced were largely overshadowed by fundamental concerns about the pace of digital adoption, our ability as a society to adjust to the consequences of a digital economy, and the effects of digital lifestyles on individuals and communities.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To compound matters further, many of the high-flying companies riding the digital technology wave are now suffering from significant declines in revenue, profitability, and market capitalization. Rapid growth in many digital technology providers has slowed. Those relying on digital technology to differentiate their solutions are struggling to maintain momentum and are not seeing sufficient returns on their investments. Expenses to acquire and keep customers <\/span><a href=\"https:\/\/www.theregister.com\/AMP\/2022\/12\/26\/opinion_column_alexa\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">are out of control<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Perhaps we should see this as an inevitable digital slowdown: A realization that the hard yards for digital transformation may still lie ahead of us. Or, more optimistically, can we view it as the beginning of a digital renewal and a chance to reset our digital compass? A focus on the current status and directions of the BigTech companies might give us some insights into the answer.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><span style=\"font-weight: 400;\">BigTech\u2019s digital rut<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">It is easy to forget just how much the digital transformation revolution is <\/span><a href=\"https:\/\/www.visualcapitalist.com\/how-big-tech-makes-their-billions-2022\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">driven by a handful of companies<\/span><\/a><span style=\"font-weight: 400;\">. Led by Amazon, Apple, Alphabet, Microsoft, and Meta, the technologies and services these companies offer are fundamental to the new architecture of systems and solutions powering much of what we now consider the \u201cdigital revolution\u201d. By creating the engine room for digital delivery at prices that encourage innovation and growth, they have redefined the digital economy. Without them, it would be impossible to support the sustained scale of impact that we have seen.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, these <\/span><a href=\"https:\/\/www.theatlantic.com\/technology\/archive\/2022\/12\/big-tech-fall-twitter-meta-amazon\/672598\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">BigTech organizations are now facing considerable barriers<\/span><\/a><span style=\"font-weight: 400;\">. Their growth has declined, innovation in their products has stalled, and concerns about their negative influences, lack of governance, market dominance, and questionable financial practices have increased. This is sparking criticism of their strategies, debate about their role in society, and a raft of new regulations to constrain their actions. All this has had a big impact on them and caused ripples across much of the digital technology landscape. No surprise, then, that the past year has seen <\/span><a href=\"https:\/\/www.msn.com\/en-us\/money\/markets\/these-5-big-techs-have-wiped-out-an-eye-popping-dollar365-trillion-in-market-value-over-a-torrid-year-for-stocks\/ar-AA15yMvI\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">their stock prices drop significantly<\/span><\/a><span style=\"font-weight: 400;\">, high-tech markets such as the <\/span><a href=\"https:\/\/uk.news.yahoo.com\/10-biggest-losers-p-500-124910822.html\"><span style=\"font-weight: 400;\">S&amp;P500 record historic losses<\/span><\/a><span style=\"font-weight: 400;\">, and the <\/span><a href=\"https:\/\/www.breitbart.com\/tech\/2022\/12\/27\/thatll-leave-a-mark-7-big-tech-moguls-lost-433-billion-in-2022\/\"><span style=\"font-weight: 400;\">personal wealth of their founders plummet<\/span><\/a><span style=\"font-weight: 400;\">. It has been described as \u201c<\/span><a href=\"https:\/\/www.thestreet.com\/technology\/big-techs-4-5-trillion-bloodbath\"><span style=\"font-weight: 400;\">a $4.5 trillion bloodbath<\/span><\/a><span style=\"font-weight: 400;\">\u201d.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is not just a problem for the founders, venture capital speculators, and investors. Workers in these companies are also being directly affected. The <\/span><a href=\"https:\/\/www.bbc.co.uk\/news\/technology-63635821\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">recent announcements of largescale job losses<\/span><\/a><span style=\"font-weight: 400;\"> may in part be due to over hiring and poor planning. However, it is also a sign that cost cutting and efficiencies are essential if these companies are going to be able to come close to the growth rates they have enjoyed in the past. Major restructuring of their businesses <\/span><a href=\"https:\/\/www.theguardian.com\/business\/2021\/feb\/06\/is-big-tech-now-just-too-big-to-stomach\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">seems inevitable<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Of course, some of this devastation simply reflects the macroeconomic trends and uncertainties facing all organizations today. As individuals and organizations tighten their belts to cope with the difficult near-term financial outlook, there will be reactions and consequences of the downward directions for sales forecasts, product inventories, and production targets. Adjustments being made by all organizations to survive in a downturn. However, more significant changes may also be required.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><span style=\"font-weight: 400;\">Toward digital renewal<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">As BigTech looks to the future, the digital economy outlook for 2023 does not look great. But it also is not without hope. To address these concerns, two distinct strategies being followed by the BigTech companies are worth highlighting.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The first is increased targeting of industries ripe for digital renewal. The most obvious domains in their sights are large government agencies and healthcare provision. Both of these have similar characteristics from a digital perspective: They face enormous pressures to modernize their practices; They are perceived to have major inefficiencies in their operations models; They are large consumers of digital technologies; They have very large multi-year technology investment budgets.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Each of the BigTech companies has made announcements about acquisitions and investments to help them address these promising market opportunities. For example, <\/span><a href=\"https:\/\/venturebeat.com\/datadecisionmakers\/how-google-could-own-healthcare\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Google has been making significant strides<\/span><\/a><span style=\"font-weight: 400;\"> to offer personal fitness solutions through wearables and apps. Its investments in <\/span><a href=\"https:\/\/health.google\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Google Health<\/span><\/a><span style=\"font-weight: 400;\"> show that it believes that wellness management will be an important part of its future revenue. Similarly, in the past few years <\/span><a href=\"https:\/\/www.cbinsights.com\/research\/apple-healthcare-strategy-apps\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Apple has made no secret<\/span><\/a><span style=\"font-weight: 400;\"> of its strategy to use its iPhone dominance to use personal data to revolutionize healthcare. Using its ability to monitor an individual\u2019s health data, Apple is looking to deliver services that support early detection of diseases, improve diagnoses using AI techniques across its huge collection of data, and extend monitoring of patient outcomes using its widely available devices and app ecosystem.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In addition, by focusing on large government contracts, the BigTech companies are building a significant base for their products and services to generate on-going recurring revenues. For example, in recent weeks the US Department of Defence (DoD) <\/span><a href=\"https:\/\/www.nextgov.com\/cxo-briefing\/2022\/12\/amazon-google-microsoft-oracle-awarded-9b-pentagon-cloud-contract\/380596\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">announced a further $9B investment<\/span><\/a><span style=\"font-weight: 400;\"> in cloud technologies to a consortium including Amazon, Google, Microsoft, and Oracle. This will act as an internal (closed) marketplace for cloud technologies across the DoD for all of their future investments in this area. A huge opportunity for the companies involved.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Secondly, BigTech organizations face additional challenges and opportunities as adoption of its solutions enters a new phase: From digitization to digital transformation. Simply \u201cautomating what we do\u201d or \u201cmoving to the cloud\u201d is not enough. Clients of digital platforms and services are looking much more carefully at where and how digital technology brings value and differentiation to their solutions.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Consider the banking sector as one of the major industries that has traditionally invested very large amounts into digital technology, relied significantly on digital platforms from the BigTech providers, and been a driver of digital innovation affecting many related areas. The <\/span><a href=\"https:\/\/www.mckinsey.com\/industries\/financial-services\/our-insights\/the-future-of-banks-a-20-trillion-dollar-breakup-opportunity\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">latest McKinsey review of the future of banking<\/span><\/a><span style=\"font-weight: 400;\"> concludes that the banking sector is at a key turning point. It cannot hope to continue operating as it has in the past. They believe that the complete restructuring of this sector is inevitable to allow them to compete effectively, adjust to changing customer needs, and offer different kinds of services to a new set of clients.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Inevitably, this transformation is enabled and supported by digital technologies. However, far from today\u2019s digital investments to drive efficiencies in existing practices and markets, the goal will be to redesign banks for a different set of needs operating within much tighter margins against new kinds of competition. As a result, their relationships with BigTech providers will differ drastically from today\u2019s transactional back-office arrangements. Perhaps <\/span><a href=\"https:\/\/www.wired.co.uk\/article\/big-tech-versus-big-banks\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">we will also see BigTech take on the banks<\/span><\/a><span style=\"font-weight: 400;\"> to replace their offerings, form joint ventures, or design completely new kinds of organizations with quite different roles, responsibilities, and business models to todays\u2019 traditional financial institutions.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><span style=\"font-weight: 400;\">Reflection<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The past few months have been sobering times for digital transformation advocates. We have been inundated with news of astounding technology advances in areas such as Artificial Intelligence (AI), Virtual Reality (VR), and quantum computing. Yet, at the same time there are troubling signs that we have made far more modest progress in overcoming barriers to address the difficult ethical dilemmas raised by replacing human decision making, reduce the gaps and inequalities across communities affected by digitally-driven changes, update legacy processes to take advantage of automation efficiencies, and adjust key aspects of our society to working patterns appropriate to people\u2019s digital lifestyles.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It is clear that BigTech companies are at the heart of digital transformation. Their health and vitality is critical to success of the digital economy. Are they in a digital rut? Or will we see 2023 as the beginning of a much-needed digital renewal? Only time will tell.<\/span><\/p>\n<hr \/>\n<p style=\"text-align: center;\"><span class=\"btn-container\"><a class=\"btn btn-md btn-primary\" href=\"https:\/\/digileaders.com\/insights\/\">More thought leadership <i class=\"far fa-caret-right\"><\/i><\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>It\u2019s always fun to look ahead at the start of a New Year to imagine what we\u2019ll encounter. But it can also dangerous. Turn the clock back 12 months and we were so sure of what was to come. Despite the drastic impact of the [&hellip;]<\/p>\n","protected":false},"author":51,"featured_media":34066,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"class_list":["post-34065","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","topic-business","topic-innovation","topic-government","topic-transformation"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The digital economy in 2023 and BigTech\u2019s search for digital renewal | Digital Leaders<\/title>\n<meta name=\"description\" content=\"It\u2019s always fun to look ahead at the start of a New Year to imagine what we\u2019ll encounter. 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