Key question: how can large organization survive the challenge from the small ones in the era of innovation and digitization?
One of the large corps dilemma – economy of scale is built on well-defined and often rigid business models/operating models which in itself hamper innovation, the question always asked: is this really our business to make?
Small organizations – if they have a have a well-defined business model it is relatively easy to adjust it and they rarely have a set operating model. As consequence of this they can’t benefit from economy of scale. On the other hand, small organizations do not carry all the overhead/infrastructure built to sustain economy of scale.
So how will digitization change this balance?
First of all, digitization and globalization goes hand-in-hand, digitization of services makes many of them globally available without large overhead and infrastructure costs. We can see this in happening in the media industry, banking, music, marketing etc. so far digitization has mainly transformed the distribution of information and services while the intellectual property still are developed in large organizations with their rigid business and operating models. Even with this level of digitization many large organizations has experienced death by a thousand cuts, often because they weren’t able to adopt the digitization into their business models fast enough.
So what will be the next step?
To make digitized services available on the net is cheap, easy and fast, so what prevent small organizations from making their services and intellectual property fully available on the net? Well, nothing really but the maturity of their markets on the net is still establishing.
So what will be the development, most experts I read or talk with have basically the same view, in the next five years digitization will take off in most businesses and the message is “surf the digitization wave or die”..
How might this impact large corps?
As mentioned above economy of scale might not be only for the large corporations, digitization of most of today’s functions like finance, legal, marketing, sales, HR, R&D, logistics, and so on, can make economy of scale available even for small organizations. Making it possible to build fully digitized companies on the net using domains of functions through specialized small clusters of organizations. This would make it possible for more flexible business/operating models making it possible to scale fast and benefit from economy of scale with a minimal overhead!
Well one thing is for sure, large organizations need to manage the digitization in their strategy to survive and prosper, and they need to develop flexible business and operating models to stay relevant and competitive.
“It is all about speed in innovating value propositions that sell and business models that deliver!”
Dataföreningen kompetens in Stockholm deliver the Certified Business Architect Master education including lots of training in innovating and building successful business models and value propositions.