The Digital Frontier

How Consumer Companies Can Create Massive Value Through Digital Transformation

Ajay Sohoni

• Publisher: Wiley
• Year: 2021
• Print ISBN: 9781119803249
• eBook ISBN: 9781119803263
• Edition: 1
• Topic: Business
• Subtopic: Advertising
• Index: Business

Discover how to move forward with your own company's digital transformation with this accessible new resource from a global leader in his field

In The Digital Frontier, experienced executive and distinguished author Ajay Sohoni delivers a relatable and readable reference for corporate executives who need the knowledge and confidence to build lasting digital change within their enterprise. From marketing to commercial, supply chain, and finance, the book offers actionable insights in an accessible format, full of anecdotes, humor, and case examples. You'll learn which areas to focus on and which not to worry about as you craft your own custom transformation journey. In the book, you'll also find:

• A demystification of the startup world for executives and an explanation of why unicorns exist (and so often ultimately fail)
• A detailed description of the digital transformation gripping companies across a variety of industries in functional areas including advertising, engagement, commerce, product development, manufacturing, and corporate functions
• A simplified 4-stage framework for companies to start from scratch and build valuable use cases

Perfect for executives in consumer-facing companies, corporate managers and leaders, business unit heads and management teams, The Digital Frontier is also an indispensable guide for digital non-natives trying to make sense of, and keep up with, the rapidly changing world around them.

CHAPTER 1
SETTING THE CONTEXT

Let There Be Value Creation

We need to stop pretending

It was another early morning in the Sohoni household, for me at least. I have been waking up at 5:30 am every morning and my wife thinks I am getting old. I am in fact, or was on this specific morning, only 38 years old but I guess the mind does age faster these days considering how much more information and how many more situations it needs to process.

So, on this morning in September 2019, in a world before COVID‐19, where the only problems facing the world were stuff like climate change, religious fundamentalism, racism and prejudice etc., I was doing my morning read of the papers. This, in my world of course, takes the shape of sipping on a nice long black while lounging on the living room sofa and mindlessly scrolling through a couple of news websites and Reddit. And there it was in the headlines:

“WeWork's Adam Neumann Steps Down as CEO”¹

This event had followed months of intrigue around bad executive behavior, a failed IPO and a broken business model. Here we go again, I thought, now we must all pretend this was shocking because come on, the company was destined for such great heights. That this was toxic management culture making a mess out of a perfectly amazing and investable asset. That this was not the norm but an accident. An accident of somewhat colossal proportions, but an accident, nevertheless. We have to all pretend, all over again, just like we did when Travis Kalanick resigned as the Uber CEO in 2017², or when Elizabeth Holmes was charged with wire‐fraud at former‐company Theranos in 2018³. Or even when big name tech company IPOs like Snapchat, Lyft or Slack did not result in the response everyone expected. If an IPO were sort of like the finish line at a marathon, this is the equivalent of not caring about who finishes or wins but just celebrating the ones that sprint like hell in the first few kilometers.

Fast forward, or more like fast backward – does that exist? to December 2019 and it is another morning albeit somewhat cloudy. I am in pretty much the same position and other than the weather the only thing that's different is my coffee – this time I'm drinking a special Colombia bean edition coffee from my trusted capsule coffee brand which tastes almost exactly the same, but I have the pleasure of paying a bit more for a slightly more attractive packaging. This time I am on LinkedIn, doing my monthly ritual of reading about success stories from my connections to feel like a complete failure myself. The Forbes 30 under 30 has just been published and features 30 millennials with a ton of courage who have started companies with catchy names made up of five letters, like ZIPSY and FRIXO (I made those up), that have raised tens of millions of dollars. And we have to all start pretending again, that this is the new model of success we and our children need to aspire to – raise funding, more and more and many times over.

This time its early 2019, I am in the United States in a workshop and we are about to kick off a 3‐day Agile session (Yes, I said A****, more about that in Chapter 7). There's coffee here as well but this is a corporate office in America so it's scalding hot water which is gently scented with coffee beans. There are a couple of bean bags thrown in the corner for effect, we have a little gig running where we record vertical videos à la Tik Tok so someone can make a collage later – because digital. A senior leader stands up and thanks us profusely for our commitment to discuss this important topic and then says the words, “We need to start acting and thinking like a startup”. And we all start pretending again, that this is indeed the one thing we need to do, think like a startup. And we pretend to know what it means to think like a startup.

This is what keeps me awake at night, and I figured I would write this book so I can sleep in peace. We need to stop pretending, seriously we do. Sitting inside large traditional companies we need to figure this out now. What is really happening out there and how can we understand it better? What should we do, and will it help us make more money? How do we all agree on a way forward together instead of pulling in many different directions? How do we stop attending webinars and start getting stuff done?

Value creation is at the root of it all

Companies make money because they create value, individuals make money because they create value. Now that is one thing we can all get behind, making money. Of course, there will be those amongst us that do not believe in the capitalist model and do not subscribe to it, but this book is not building a case for or against capitalism. This book takes the current market situation as a reality that companies need to operate in and tries to unpack the situation to build a shared understanding and a practical way to succeed. Success in this world is about profits, and profits in turn are about value creation.

I am not a trained economist, neither am I a university professor but I wanted to make an attempt to lay out my internal dialogue and reflection here in words and see if it helps you as readers to understand what is happening just as it did for me. In doing so I am going to dramatically simplify things but hopefully it will not take away from the validity of my thesis.

I would define the act of Value Creation as the undertaking of an activity by an individual that produces an outcome (say a product) that has value to someone else. In performing the activity, the individual has created something of value to someone – value creation. Say, as an example, Person A finds out that he is sitting on top of an oil well and decides to drill for it, takes out a barrel of oil and it costs him 10$ to do so. Person B needs said oil and is willing to pay person A 15$ to buy that barrel of oil off him. Person A has created 15$ of value by deciding to extract that oil, value that would not have been created had he chosen not to do anything and just sit at home and binge‐watch The Witcher. And in that process, he has earned 5$ of profit, a compensation he got paid for performing the activity of drilling the oil out of the ground.

If now there were a lot more Persons A and a lot fewer Persons B, because there was a lot more oil discovered, or because the uses for oil just disappeared as the world woke up to the grim realities of climate change, then the demand for oil would drop. Consequently, the world would not “value” the activity of drilling for oil as much anymore and Person B will likely only pay 12$ for a barrel. It would still cost Person A 10$ to drill and they will now only earn 2$ instead of the original 5$. Less profit for A because the world does not value what they do as much anymore. Less value created.

We need to imagine the world and our economy as an incredibly complex, layered and interconnected web of individuals and companies that wake up every day and set about performing activities that result in value being created for other individuals and companies. And if you are creating something that has value for someone else you will get paid for it and make money. How much money you make will depend on how badly people need what you are making and how many others are making something similar. The opposite is then also true, if you are not making any money or enough money then you are likely not creating any value or not creating enough value to deserve a fair compensation for your activities.

So, this begs the question, are startups creating value?

Let us delve into this taking five of the most popular use cases of the last decade as an example: Ride hailing, Co‐working spaces, Food delivery, e‐commerce and Digital payments.

Ride hailing – Back in 2009, while I was getting my MBA, a bunch of us went to Kuala Lumpur to watch the Formula One Grand Prix at the Sepang circuit. Getting a cab in KL was a nightmare, you were constantly getting overcharged, refused and on one occasion threatened with a knife. Ten years on, ride hailing in KL is a breeze and by bringing absolute transparency in the supply–demand equation of the urban transportation market, ride hailing companies have truly performed a valuable activity for us consumers. But what they have failed to do, over their entire history of existence, is to make any profits at all from this venture. In other words, they are being paid 8$ for their barrel of oil when it is costing them 10$ to drill the oil out. And the reason for that is quite straightforward. To make sure they continue to get massive funding and huge valuations in a fiercely competitive context they have had to sell more and more rides and acquire more and more consumers at a loss. All with the promise of monetizing this consumer base in the future – a promise that has yet to materialize. Some have diversified into other use cases, like food delivery and payments, all of which are also loss‐making and, as one might expect, putting several loss‐making businesses under one company makes for a bigger loss‐making company.

Co‐working spaces – The key question on my mind about co‐working spaces has always been who is the company creating value for? WeWork's failure can be attributed to many things, and there were far too many, but they also got the answer to this fundamental question wrong. Airbnb creates obvious value for the hosts as well as the travelers as most of you have doubtlessly experienced. A co‐working model creates a lot of value for real estate asset owners as they get the chance to earn a better return on their asset as it becomes available to a larger consumer base and gains higher occupancy. But WeWork took that out of the equation by owning the real estate and then renting it out cheaply, so they took value from the real estate asset from their own pockets and handed it to consumers. On the consumer side, other than the obviously severely attractive pricing, it was unclear if consumers really needed this product. There was no endemic lack of office space in our cities and a startup employee's willingness to accept dilapidated office infrastructure is way higher than a traveler's willingness to accept a decrepit Airbnb accommodation. I once spent a whole week during my startup tenure sitting on a chair which only had three l...

Table of contents

• Cover
• Table of Contents
• TITLE PAGE
• COPYRIGHT
• DEDICATION
• WHY I WROTE THIS BOOK AND WHY YOU SHOULD READ IT
• ACKNOWLEDGMENTS
• CHAPTER 1: SETTING THE CONTEXT
• CHAPTER 2: HOW COMPANIES REACH CONSUMERS
• CHAPTER 3: HOW COMPANIES ENGAGE WITH CONSUMERS
• CHAPTER 4: HOW CONSUMERS TRANSACT
• CHAPTER 5: HOW COMPANIES CREATE PRODUCTS AND BRANDS
• CHAPTER 6: HOW COMPANIES MANUFACTURE AND DISTRIBUTE PRODUCTS
• CHAPTER 7: HOW COMPANIES WORK TOGETHER
• CHAPTER 8: MAKING THE TRANSFORMATION HAPPEN
• EPILOGUE
• INDEX
• END USER LICENSE AGREEMENT