KIRAN MATHUR MOHAMMED
Developing countries’ old hack – use cheap labour and imported capital to catch up – is working less and less. The flood of investment to the global south is slowing, automation and artificial intelligence lower costs in the rich world.
Technology companies are the world’s most valuable and fastest-growing. But they have hardly inspired imitation. Venture capital firms FoundersLane and Factor10 estimate that less than two per cent of the remaining firms make money off digital platforms. Fewer than ten per cent of businesses have future-resistant models.
Small wonder that enthusiasm for tech has been tempered by wariness. Despite some champions, like former TT Manufacturing Association president Amjad Ali, the hard truth is that many have been burned. Fewer than 15 per cent of companies have seen any financial return from tech investments.
So what tech platforms are actually worth spending money on? Let’s look at the winners.
The winning tech platforms are networks. They connect people and assets. The beauty of these platforms is that the network and not the company itself creates the product.
Facebook creates no content: its users do. Airbnb owns no property: but enables owners to create rental properties overnight. Users gain too. They access many new services, often for free, that they could never enjoy before.
Crucially, this means that companies don’t need to invest in assets or large organisations themselves. They can therefore grow much faster. To the extent that tech companies raise large amounts of capital, it is to keep prices as low as possible, and to dominate whole markets.
As they move away from large organisations and towards larger networks, these companies change the way talent is used. More and more online platforms, from Fiverr to Upwork, are making it easier than ever to match projects with people.
In the US, an Upwork survey says freelance workers comprise 35 per cent of the workforce. That number could be higher here. Developing countries like ours typically have more informal workers. JLL Consulting projects freelancing to rise by as much as 80 per cent by 2030.
Old workplace performance incentives will no longer work. Motivation and autonomy will increasingly replace discipline and punishment, even as reviews and performance tracking ensure freelancers are accountable. That ability to track performance will be particularly transformative in countries like TT, where the World Values Survey estimates that just 3.4 per cent feel they can trust a stranger.
And as Uber and others have found to their chagrin, freelancers themselves are finding a stronger collective voice. Keeping freelancers happy will be just as important for companies as keeping their customers happy.
Of course, it is easy to sit at the benches and suggest that a company must change their whole business model to future-proof themselves. That seems impracticable for most.
One option for those that can’t aggressively change is to find a bright spark with a new tech platform: and buy them. But even if you can’t do that, observing tech companies’ networked business models can reveal how technology can be profitably adopted.
Traditional companies have indeed been investing in automation. However, many have done so without finding better things for their staff to do.
Time is one of the biggest benefits of automation. If you don’t re-train staff, you will lose that time: the biggest benefit from your investment.
Tech networks’ main product is their platform, built by their staff. So they obsess over what their staff are doing and how to optimise their working lives.
The second lesson is how network companies use data. Networks throw off huge amounts of data that allow them to quickly figure out what they need to change, and what they need to double down on. Traditional companies have increasing access to data pools of their own. Using data is cheap and can often make a big difference to the quality of decisions.
The final lesson is the importance of speed. A network company like an Alibaba or an Uber can very quickly roll out platform-wide changes: and treat speed as all-important.
Now, technologies like wireless sensors, virtual modelling and 3D printing allow traditional companies some of that speed and flexibility. They make it easier to get products to market quickly without incurring huge sunk costs.
Seven out of the world’s ten most valuable companies have digital business models. Both FoundersLane and Factor10 reckon that 70 per cent of new companies worth more than US$1 billion are digital.
Nothing is stopping us from joining them.
Kiran Mathur Mohammed is a social entrepreneur, economist and businessman. He is a former banker, and a graduate of the University of Edinburgh