Wednesday, January 5, 2022

g-f(2)789 THE BIG PICTURE OF THE DIGITAL AGE (1/5/2022), HBR, Can Big Tech Be Disrupted?

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"g-f" fishing of golden knowledge (GK) of the fabulous treasure of the digital ageThe New World, Can Big Tech Be Disrupted? (1/5/2022)  g-f(2)426 

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Even the digital superpowers face threats

According to Jonathan Knee, a Columbia Business School professor and veteran investment banker specializing in media and tech, even the digital superpowers face threats.
  • In this interview he shares an analysis of the weaknesses and strengths of the large tech companies and the strategies they might use to defend themselves.
  • Together or separately, the tech giants should partner with the public sector on projects that in the short term might be financially costly and limit flexibility but will yield longer-term benefits.

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Can Big Tech Be Disrupted?, Alison Beard, From the Magazine (January–February 2022), Harvard Business Review, HBR.


Jonathan Knee


Professor Knee teaches Media Mergers and Acquisitions, co-teaches The Media Industries: Public Policy and Business Strategy with Professor Tim Wu of Columbia Law School, and co-teaches Digital Investing with Adjunct Professor Jeremy Philips. He also serves as co-director of the Media & Technology Program with Professor Sarvary. Professor Knee is a Senior Advisor at Evercore Partners. Before joining Evercore as a Senior Managing Director in 2003, Professor Knee was a Managing Director and Co-head of Morgan Stanley's Media Group. He was previously Publishing Sector Head in the Communications, Media and Entertainment Group at Goldman Sachs. Prior to becoming an investment banker, he was Director of International Affairs at United Airlines and served as Adjunct Professor of Law at Northwestern University. His writing has appeared in The Atlantic, Wall Street Journal, New York Times and Washington Post and he is the author of Class Clowns: How the Smartest Investors Lost Billions in Education (2017), co-author of Curse of the Mogul (Portfolio:2009) and author of The Accidental Investment Banker: Inside the Decade that Transformed Wall Street (Oxford: 2006). 

Alison Beard

Alison Beard is a senior editor at Harvard Business Review.

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  • According to Jonathan Knee—who is a veteran investment banker specializing in media and tech, a Columbia Business School professor, and the author of The Platform Delusion: Who Wins and Who Loses in the Age of Tech Titanseven digital superpowers face threats, from start-ups as well as seasoned competitors.  
  • Knee: Today many people in the industry, as well as academics and investors, seem to think that the large tech platform companies uniformly benefit from strong network effects, which inexorably propel them toward global dominance. But that is demonstrably false.
  • Knee: All these companies will live or die by the same principles of competitive advantage we’ve long studied. Don’t get me wrong: These are all very good businesses, but each is good for different reasons involving multiple reinforcing advantages rather than a uniform silver bullet. And each has its own vulnerabilities.

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    Lessons learned, HBR

    Even the digital superpowers face threats

    • Let’s start with the notion of scale. The traditional view is that it helps companies by spreading fixed costs. The new, sexy scale on the internet comes from network effects, and people argue that it offers an inherently superior competitive advantage. But that’s crazy. In the absence of significant fixed costs, any network-effect-driven business is going to attract competition from new platforms that find they can break even at extremely low usage levels. Also, network effects are not the primary driver of competitive advantage at most of these companies. At Facebook, now Meta, yes: The more users it has, the better the experience of connecting and sharing is. For Microsoft, yes: Operating systems are a classic network-effect business. But the original success of Apple, Google, Amazon, and Netflix did not rest primarily on network effects. Apple is a consumer-products business. Google benefits from massive fixed-cost requirements reinforced by continuous learning. Amazon’s original retail business, which still accounts for a majority of its revenue, has no network effects to speak of, and neither does Netflix.
    • All these companies will live or die by the same principles of competitive advantage we’ve long studied. Don’t get me wrong: These are all very good businesses, but each is good for different reasons involving multiple reinforcing advantages rather than a uniform silver bullet. And each has its own vulnerabilities.

    What advice would you give executives or entrepreneurs trying to topple a tech titan or at least take a portion of its business?

    • I’m a big believer in starting small. You want to focus on customer pain points within clearly identifiable, manageable communities where you can quickly build scale and earn loyalty. The growth paths of most great businesses look like ringworm—they started with an inner ring and built out to the next ring of customers and then the next. When you have a targeted market, there’s also a greater chance that it won’t attract or support competitors and that the specialized data collected is more valuable. Often these are customers that the giants can’t effectively serve. 

    And what would you say to leaders of tech giants about defending against disruption?

    • Watch your flank. Be vigilant about getting niched to death. Competitors will try to gain relative scale within certain interest groups, demographics, or geographies, so you need to be constantly innovating and releasing new versions of products that leverage your strengths while serving narrower communities.
    • I’d also tell them to manage their ecosystems in a more constructive way so that the people up and down the value chain have a vested interest in their continued success rather than going to sleep every night hoping for their destruction. That’s an underappreciated aspect of long-term strategic survival.
    • Finally, I’d suggest they be proactive and thoughtful in engaging with governments and helping them achieve their policy goals.  All these companies have incredible resources that might help solve some of society’s biggest problems—including those they had a hand in creating.

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    • Category 2: The Big Picture of the Digital Age
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