By 2025, 80% of all digital services to be delivered through a few core platforms, predicts global consultancy firm
British businesses are facing an existential crisis; business consulting firm, Virtusa, predicts that hundreds are at riskdue to the explosive growth of innovative tech giants led by Baidu, Alibaba, and Tencent (BAT), and Amazon. Virtusa warns that firms that deliver services, such as banks and telcos, are lagging behind in the digital economy compared to firms, such as those in China, that capitalize on emerging trends in other markets where those companies, like BAT, have perfected a new, horizontal business model. BAT has brought together products and services from a range of adjacent industries with one ultimate aim – the ability to own and monetise all facets of a consumer’s lifestyle choices.
BAT has taken this horizontal expansion model and used it to incubate hundreds of companies outside of China across a dozen sectors; all dedicated to meeting every need of a billion customers through a single platform.
Such acquisitions enable these businesses to build detailed digital personas through which they identify every customer touchpoint that can be monetised, providing a roadmap of new industries to enter. In this way, acquisitions are now becoming consumer-driven, creating a shift in strategic business thinking. Instead of choosing markets based on specific industry knowledge, BAT selects targets based on how they fit into the overall digital landscape to appeal to convenience-hungry millennials – examples are investments made by BAT in Snapchat, Farfetch, and Lyft. As a result, Virtusa predicts that digital platforms will become the primary provider for all our lifestyle needs, with consumers processing 80 percent of their purchases through a single provider by 2025.
“In the new digital economy, intuitiveness is king – something BAT does better than anyone,” said Raj Rajgopal, president of Virtusa’s Digital Strategy Group and head of Virtusa’s China Insights Group. “Customers – especially millennials – don’t care who fulfills their order or delivers them a service. They don’t need to have a dedicated banking or telco provider, they’re perfectly happy to bank via a social media app if it works intuitively. BAT has extended this logic across all industries, and the success of these firms has been demonstrated by an astonishing 50 percent growth rate year-on-year. Their platform users can now deal with one company that can facilitate all their needs, from transport, to entertainment, to financial services – and BAT is still moving into new sectors. Firms are waking up to a world where the economy is being built around platforms, where only the fulfillment of a product or service will matter, not who fulfills it – a realisation that should serve as a wake up to all specialist businesses in the UK.”
Virtusa predicts this shift will rock the foundations many UK businesses are built on. BAT, along with American giants like Amazon, Google and Facebook, will be the dominant force that channels all future sales – weakening the UK’s global presence unless they put in place strategies now to compete. As these platforms become the conduits through which all customer interactions take place – from cashier-less stores to magic mirrors, and even hybrid messaging/payment apps – we get closer to an age where brand, heritage, and expertise pale in importance when faced against convenience and intuitiveness. This will force UK businesses into adopting a supplier relationship with platform providers that would negatively impact profit margins – unless they take steps today to adapt.
“A lot of companies will struggle to survive in the new digital ecosystem,” said Rajgopal. “The ones that plan to do so successfully will have to work through three options. Lead in the creation of a platform through a set of strategic acquisitions to provide end-to-end lifestyle services such as those provided by Alibaba or Tencent, enter into a network of strategic partnerships as a peer similar to the alliances we see in the airline industry, or transition into selling via somebody else’s platform, as many traditional retailers have with Amazon. We have created the China Insights Group to help companies analyse the competitive playbook of BAT, understand the threat they pose if these practices are adopted, prepare early on a strategy to pursue, and how to go about it.”
Virtusa’s China Insights Group was set up four months ago to identify and define the strategies that companies like BAT employ to enter different markets. The group’s analysis has resulted in the creation of playbooks for Ali Baba, Tencent, Ping An Insurance, and ZhongAn. For each playbook, CIG has developed 20 detailed use cases that lay out each company’s strategy for expansion and the capabilities they plan to use to supplant the competition. These playbooks also include how these companies determine what types of services to provide and what customer journeys to support. The goal of CIG, in conjunction with Virtusa’s Digital Business Strategy team, is not to only to help clients battle the incoming threat of these Eastern tech giants. It is also to enable firms to emulate these strategies in order to build dominance in their own respective markets.
In particular, it recommends that all firms:
- Analyse the biggest digital threats they face and ‘wargame’ a strategy ahead of a new tech giant entering their sector.
- Ensure they are tracking innovation in other markets, particularly China, to avoid falling behind the curve.
- Start building detailed and comprehensive digital personas for individual consumers.
Virtusa’s China Insights Group will continue to research and explore how Eastern innovators are achieving market dominance and will use those insights to help clients of Virtusa learn how to adopt similar strategies that will lead them to dominance in their own markets.
Regulation in western geographies will slow the expansion of these Chinese giants allowing “Facebook, Google, and Amazon to catch up and compete with them,” said Rajgopal. “But for most firms who are experts in just one industry, meeting this new challenge is going to be incredibly difficult and they need to decide on their strategy. Unfortunately there’s no magic bullet and each company has to figure out its own path – but the decision needs to be made now because in five years’ time when BAT is at the door, it’ll be too late to respond.”
ExxonMobil to sell some UK, North Sea assets to HitecVision for over $1 billion
(Reuters) – Exxon Mobil Corp said on Wednesday it would sell its non-operating interest in its UK and North Sea exploration and production assets to private-equity fund HitecVision for more than $1 billion.
Exxon has been looking to sell its oil and gas assets since late 2019, seeking to free up cash to focus on a handful of mega-projects.
The deal includes ownership interests in 14 producing fields operated primarily by Shell as well as interests in the associated infrastructure. Exxon could also receive about $300 million in contingent payments based on a potential for increase in commodity prices.
Exxon’s share of production from these fields was about 38,000 barrels of oil equivalent per day in 2019, the company said.
Exxon said it would retain its non-operated share in upstream assets in the southern part of the North Sea as well as its interest in the Shell Esso gas and liquids (SEGAL) infrastructure, which supplies ethane to the company’s Fife ethylene plant.
HitecVision, in partnership with Eni, had bought Exxon’s Norwegian North Sea assets for $4.5 billion in 2019.
Initially, Exxon hoped to raise more than $2 billion from the sale, which was planned for late 2019. In June 2020 sources told Reuters that the portfolio was more likely to fetch $1 to $1.5 billion given the oil price weakness last year.
(Reporting by Arathy S Nair in Bengaluru; Editing by Anil D’Silva)
JPMorgan’s blockchain payments test is literally out of this world
By Anna Irrera
LONDON (Reuters) – Stuck in space with bills to pay? Don’t worry, the satellites could take care of it.
JPMorgan Chase & Co has recently tested blockchain payments between satellites orbiting the earth, executives at the bank told Reuters, showing that digital devices could use the technology behind virtual currencies for transactions.
The so-called Internet of Things (IoT), where devices connect to one another, is most associated with consumer electronics, including smart speakers like Amazon Echo and Google Home, and banks want to be ready to process payments when these smart devices start doing transactions autonomously.Umar Farooq, the CEO of JPMorgan’s blockchain business Onyx, thought space was a cool place to try it out.
“The idea was to explore IoT payments in a fully decentralised way,” Farooq said. “Nowhere is more decentralised and detached from earth than space.”
“Secondly we are nerdy and it was a much more fun way to test IoT,” he said.
To run the space experiment, the bank’s blockchain team did not send its own satellites into space, but worked with Danish company GOMspace, which allows third parties to run software on its satellites.
Farooq said the satellite test showed blockchain networks could power transactions between every day objects.
The test also showed it could be possible to create a marketplace where satellites send each other data in exchange for payments, as more private companies launch their own devices into space, Tyrone Lobban, head of blockchain launch, at Onyx said.
Back on earth, examples of IoT payments that could become a reality sooner include a smart fridge ordering and paying for milk on an ecommerce site, or a self-driving car paying for gas Farooq said.
Blockchain, which first emerged as the software underpinning cryptocurrencies, is a shared digital ledger of transactions. Financial companies have invested millions of dollars to find uses for the technology hoping it can reduce costs and simplify more complex IT processes, such as securities settlement or international payments.
But so far, blockchain has yet to have widespread impact in financial services.
JPMorgan has been one of the most active banks in blockchain, announcing it had created its own distributed ledger called Quorum in 2016, which was sold to blockchain company Consensys last year. The bank also developed a digital coin called JPM Coin and in 2020 created Onyx.
Onyx has more than 100 employees and its blockchain applications are close to generating revenues for the bank, it said.
Among the division’s applications is Liink, a payments information network involving more than 400 banks, a project to replace paper checks and IoT experiments, Farooq said.
(Reporting by Anna Irrera. Editing by Jane Merriman)
Garment workers in Thailand receive full compensation after wages expose
By Nanchanok Wongsamuth
BANGKOK (Thomson Reuters Foundation) – Garment workers in Thailand who were illegally underpaid while making products for major brands have received all the wages owed to them after theme park operator and film producer Universal Studios agreed to pay the outstanding amount.
Universal Studios, owned by media giant Comcast Corp’s NBCUniversal, agreed to give $20,000 to a group of Myanmar workers on Wednesday – following three other global brands in making payments to settle the 3.5 million baht ($116,550) owed in unpaid wages.
“We take this matter very seriously and this is not in line with our core values,” a NBCUniversal spokeswoman said.
A Thomson Reuters Foundation investigation in September 2019 found dozens of migrants from Myanmar working at several factories in the western region of Mae Sot were paid less than the daily minimum wage of 310 Thai baht ($10.32).
A group of 26 workers at one of the factories raided in 2019 by officials sued the owner – Kanlayanee Ruengrit – in August last year for failing to pay the 3.5 million baht owed to them.
Interviews with workers by local and global rights groups found that her factory was making goods for several major brands from Universal Studios to Britain’s largest supermarket Tesco.
The workers later received a payment of about 2.88 million baht from Kanlayanee and three brands that said Kanlayanee’s factory had been subcontracted by their suppliers or partners without permission – Disney, Starbucks and Tesco.
The money from Universal Studios will be paid to MAP Foundation, which has supported the workers and been in discussion with the companies, and will distribute the funds directly to the workers.
“Since the former licensee has failed to respond to multiple requests to pay the affected Thai factory workers, we are making a goodwill donation to MAP Foundation … to distribute funds directly to the workers,” the NBCUniversal spokeswoman said.
Suchart Trakoonhutip, a coordinator at MAP Foundation, said the payment marked the first time that underpaid workers in Mae Sot had received the full amount owed to them in a wage dispute.
The Mae Sot case sets an example for other brands to follow in terms of taking responsibility, but workers should not have to rely on the goodwill of companies in order to receive money they have earned, said Ilona Kelly, a coordinator at pressure group Clean Clothes Campaign.
“The industry urgently needs binding agreements to hold brands to account, the lack of which has become even more notable during COVID-19 as millions of workers are now owed wages and severance pay,” she added.
“Without (government) legislation, the happy ending of the Kanlayanee story will continue to be as unobtainable as a fairytale ending for most workers.”
One of the Kanlayanee workers, who now works part-time on a farm, told the Thomson Reuters Foundation that he plans to send the additional money to his sick father in Myanmar.
“I feel happy and proud that I will soon receive the full amount of money I am owed,” said the worker, who spoke on condition of anonymity due to the sensitivity of the matter.
($1 = 30.0300 baht)
(Reporting by Nanchanok Wongsamuth @nanchanokw; Editing by Michael Taylor. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)
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