Thursday, 15 September 2016 19:52

Businesses not in good shape for digital platforms, many will fail: Accenture Featured

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Businesses not in good shape for digital platforms, many will fail: Accenture Image courtesy of kangshuuters at freedigitalphotos.net

The outlook for digital start-ups looks less than promising, with global professional services firm Accenture warning that the vast majority of new digital platform startups are destined to fail in coming years.

And, while Australia has a “relatively strong” ranking at sixth in the world in Accenture’s Platform Readiness Index”, Accenture warns that the nation looks set to lag behind global counterparts in the digital platform market, due to the lack of “sufficient business and socio-economic enabling conditions”.

While warning about start-up failures, Accenture says that after “digital-born” companies paved the way to growth with platform business models, now it is small enterprises and traditional businesses entering the digital platform market in a second worldwide wave. In the first wave — in the five years betweeen 2010 asnd 2015 — US$20 billion was invested in digital platforms  

Accenture also says that the digital gulf between countries will increase in the coming years.

And, even though Australia is ranked “relatively strong” at sixth in the platform readiness stakes, it scored low on key metrics like “digital user size and savviness and digital talent and entrepreneurship” compared to its global counterparts.

Luca Martini, managing director for Accenture Strategy in Australia, says Australia’s low score on key metrics like digital user size and savviness and digital talent and entrepreneurship could put the country in “danger of missing out in the platform economy”, and to keep pace, Australia needs to “prioritise the creation of conditions that can spawn new technology-based industries and businesses”.

The global report, published in collaboration with the G20 Young Entrepreneurs’ Alliance, shows that China, India and the US will dominate the platform economy by 2020, with the UK and Germany “joining them at the top” of the Accenture Platform Readiness Index that assesses the ability of 16 G20 economies to support the flourishing of digital platforms.

Accenture’s analysis shows that rankings on the Platform Readiness Index strongly correlate to the levels of digital platform activity and investment in G20 countries.

“Platforms offer entrepreneurs access to large scale markets through participation. It’s up to policy makers to create the ideal conditions for SMEs to participate in and establish platform business models, which in the long run will boost Australia’s capacity for innovation and economic growth,” says Jeremy Liddle, president of G20 YEA Australia.

The report recommends that governments engage with businesses leaders to advance a range of policies that can create a “rich enabling environment for digital platforms” including the following actions:

1.    Prioritise data protection standards and rules: Drive the harmonisation of data privacy and data security legislation. Smooth cross-border data transfers.

2.    Design regulations with digital platforms in mind: Experiment with regulations alongside new technologies and business models.  For instance, the UK’s Financial Conduct Authority’s “regulatory sandbox” allows start-ups to test ideas without immediately incurring all the normal regulatory consequences.

3.    Encourage cross-border electronic trade. Harmonise taxes and standards, consumer protection, contract laws and logistics infrastructure. The eWorld Trade Platform (eWTP), initiated by B20 China, aims to accelerate international policy collaboration to support SMEs.

4.    Invest in digital infrastructure:  For example, the EU’s Payment Services Directive (PSD2) will empower start-ups to expand customer reach and encourage innovative business models.

5.    Think small, act big: Educate SMEs on alternative funding, such as crowdfunding and peer-to-peer lending; and on data privacy and consumer protection. Support SMEs with digital economic zones to support e-commerce.

Accenture also outlines in its report five ways it says should be followed in developing digital platforms, and notes that only 15% of today’s Fortune 100 companies have developed digital platform business models to date, and as few as 10% of new start-ups focused on digital platform business models will become profitable independent entities in the coming years.

The report claims, however, that successful digital platforms will proliferate as small businesses and traditional industries follow the lead set by digital-born platform companies.

And, Accenture identifies five factors it says are critical to sustaining critical mass in digital platforms, which use new technologies to create large scale markets of customers and service providers:

1.    Proposition – Create differentiated platform services that extend beyond the point of transaction; and that support both customers on the demand side and service providers on the supply side.

2.    Personalisation – Target customers through tailored experiences across all channels, using customer data to anticipate needs and offer bespoke experiences.

3.    Price – Apply new pricing models, such as pay-as-you-go, ‘freemiums’, and subscription pricing to respond to peak demand.

4.    Protection - Embed trust at the heart of the platform, using both prevention and compensation techniques to attract customers and differentiate the platform.

5.    Partners – Scale the platform rapidly by identifying digital partners – such as app developers and payment service providers – who can enrich the platform experience and fulfil customer needs.
 
According to Martini, digital platforms are not “just the preserve of digital born companies” like Airbnb and Alibaba, but are now becoming a “default business model in most industry sectors, both B2B and B2C”.

“To enjoy efficiencies and high rates of growth, companies will need to transform everything from the way they co-create goods and services with third parties, tailor their offerings to customers, and price them dynamically. Crucially, they will only sustain critical mass by working with digital partners who can deliver the range of functional services that complete the customer experience,”  Martini concludes.

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Peter Dinham

Peter Dinham - retired and is a "volunteer" writer for iTWire. He is a veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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